OFFICIAL ASSIGNEE Vs. KHAMBAMPATI PEDDA SUBBA RAO

JUDGEMENT

(1.) This appeal is concerned with the insolvency of the three partners of Mahomad Khaja Sahib & Co., and the simple point at issue is whether a certain agreement to which these partners were parties, which is unregistered, is or is not exempt from registration. The learned trial Judge has held that it is not exempt, and therefore is not admissible in evidence and the Official Assignee who seeks to rely upon it has appealed. The circumstances in which the document came to be executed were these. In 1928 two insolvency petitions I. P.N. 483 and I.P. No. 527, were filed in the High Court against the firm in question each by two of its creditors. These petitioning creditors applied under Section 13(8), Presidency Towns Insolvency Act, for leave to withdraw their petitions. Their applications were posted to 11th December 1928 and on that day they produced in support of them the agreement now in dispute which was undated but signed by the three partners and by nineteen of their creditors. As the Official Assignee did not object to the applications, and no doubt in view of the arrangements evidenced by the agreement the Court granted leave to withdraw.

(2.) The agreement begins by setting out the indebtedness of the firm at rupees 99,500 and its potential assets, i.e., outstandings due but not yet realised as Rs. 1,95,850. It then goes on to provide that the partners shall pay immediately a sum of Rs. 22,300 which is to be lent to them by a relation;. They are then to have a period of one year in which to collect their outstandings and pay off the balance of their debts in full. If they fail to do this they are to sell certain immovable property and from the sale proceeds pay off the balance and also finally, the debt owing to their relation. In the meantime a charge is created in favour of the creditors over the immovable property already referred to. Finally (para. 8) if both the outstandings and the sale proceeds are insufficient to pay the creditors in full, the creditors are to be at liberty to recover the balance by proceeding against the partners personally or against any other property which they may possess. It is not seriously denied: that prima facie such a document as this requires registration. It falls clearly within Section 17(1)(b), Registration Act as creating an interest in immovable property. It is for the appellant therefor to show, if he can, under what provision or provisions of the Registration Act the document can be exempted. He has referred us to two provisions. The first is Section 17(2)(i) which exempts "any composition deed" and the second is Section 17(2)(vi) which exempts any decree or order of a Court except a decree or order expressed to be made on a compromise and comprising immovable property other than that which is the subject matter of the suit or proceeding.

(3.) On the first of these contentions the learned trial Judge has held that this document cannot be a composition deed as it is not, technically speaking, a deed and does not record any composition. He has also refused to have recourse, in determining this matter, to the definition of "composition deed" to be found in Sch. 1, Stamp Act. In appeal we have been referred to a ruling of a Benoh of the Bombay High Court, Chandra Shankar Pranshankar v. Bai Mogan 1914 Bom. 55 in which the definition given in the Stamp Act was applied to the expression "composition deed," as found In the Registration Act, and without feeling bound for the determination of this appeal to express any opinion on the point whether this ruling should or should not be followed in this respect we have proceeded to hear the arguments of the appellant's learned advocate based upon that definition. There are three kinds of "composition deed" contemplated by the Stamp Act. Such a deed may either (i) convey property for the benefit of a man's creditors, (ii) secure to them the payment of a composition or dividend or (iii) provide for the continuance of a debtor's business under the supervision of inspectors. It is not seriously argued that the agreement now in question can fall under the first or the third of these heads but it is contended that it fulfils the conditions of the second.