NARAIN DAS DORI LAL Vs. MIHI LAL

JUDGEMENT

(1.) In this appeal the petitioning creditor in an Insolvency case seeks to set aside the order of the learned District Judge of Moradabad, which, reversing the order of the Insolvency Court, dismissed the appellant's application that his claim against the insolvent partnership should be allowed to rank with the claims of the creditors of the individual partners.

(2.) On the petition of the appellant firm five connected partnership firms were adjudicated insolvents in insolvency proceedings Nos. 23 and 24 of 1925. One Sahu Bhikari Das or members of his family, were partners in all five firms. The appellant firm proved in the insolvency proceedings a debt of Rs. 45,069 in case No. 23 and a debt of Rs. 51,814 in case No. 24. Besides the various partnerships, there was a set of accounts of what was known as the Bahjoi Kothi, which contained the personal dealings of Sahu Bhikari Das and his family, and a number of debts shown in these accounts were proved by personal creditors of Sahu Bhikari Das. The official receiver has realised the sum of about Rs. 30,000 from the personal property of Sahu Bhikari Das and members of his family, which amount has, by the decision of a Full Bench of this Court, been held applicable in payment of the proved debts in the insolvency proceedings.

(3.) The official receiver reported to the Insolvency Court that, in accordance with the provisions of Sub-section (4), Section 61, Provincial Insolvency Act, the personal creditors of Sahu Bhikari Das were entitled to have their debts satisfied out of this amount before any of it could be made available to pay the debts of the creditors of the partnership: hence the appeal. To this report the appellant objected, contending that the amount should be distributed pro rata among all the creditors whether of the partnership firms or of the partners personally who had proved their debts. The Insolvency Court allowed this objection. On appeal by some of the personal creditors to the District Judge, the learned District Judge was of opinion that in accordance with the terms of Sub-section (4), Section 61, Provincial Insolvency Act, the personal creditors of Sahu Bhikari Das were entitled to have their debts paid out of the separate property of Sahu Bhikari Das, his sons and grandsons and that only the assets remaining over after the debts of the personal creditors has been paid, could be made available to the creditors of the insolvent firms. Against this order of the learned District Judge the petitioning creditor, namely, the firm Narain Das Dori Lal, has preferred a second appeal to this Court. Sub-section (4), Section 61, Provincial Insolvency Act, is in the following terms: In the case of partners, the partnership property shall be applicable in the first instance in payment of the partnership debts, and the separate property of each partner shall be applicable In the first instance in payment of his separate debts. Where there is a surplus of the separate property of the partners, it shall be dealt with as part of partnership property; and where there is a surplus of the partnership property it shall be dealt with as part of the respective separate property in proportion to the rights and interests of each partner in the partnership property.