SHANKAR LAL Vs. HAKIM SYED ALI AHMAD

JUDGEMENT

(1.) This appeal is connected with Revision No. 156 of 1934 and the same question of law is raised in both proceedings. It appears that one Hakim Saiyid Ali Ahmad was adjudged an insolvent in 1910. In the year 1930 he applied under Section 35 for annulment of adjudication, but his application was dismissed and the dismissal order was maintained up-till the High Court. In those proceedings the insolvent made an attempt to obtain a reduction in the contractual rate of interest on his debts and it was held by the learned District Judge that: An application under Section 35 is something quite different; the Court is not functioning as a distributor of assets at all. It is therefore no part of the Court's duty to start calculating what rate of interest ought to be paid to each creditor. Before the debtor can ask the Court to annul the order of adjudication he has to prove to the Court that he has paid up his total debts in full including all the interest up to the date of payment that he had contracted to pay to each creditor.

(2.) Having failed in his attempt to obtain a reduction of interest under Section 35 the insolvent submitted a proposal for a composition in satisfaction of his debts under Section 38 of the Act. He proposed to pay all his debts, but expressed his willingness to pay interest at 3 per cent per annum only. On this, notice was sent to the creditors under Sub-clause 1 and the creditors in a body opposed the proposal and demanded interest at the contractual rate from the date of the adjudication. The trial Court accepted the proposal of the insolvent with a modification inasmuch as it ordered the payment of interest from the date of the adjudication at 4 per cent per annum. Certain creditors appealed against the order of the trial Court, but the learned District Judge dismissed the appeals and the matter has come before us in these two connected , proceedings.

(3.) It is contended on behalf of one of the creditors that the order of the Court on the application of the insolvent under Section 35 refusing to reduce interest operates as res judicata. We are of opinion that proceedings under Section 38 are not allied to proceedings under Section 35, for whereas in the latter case the insolvent has to show that the debts have been paid: in full, which implies that the debts have been paid along with interest at the contractual rate, Section 38 contemplates a proposal for a composition in satisfaction of debts and implies a reduction in the claim of the creditors. The main objection however is that the proposal of the insolvent for paying a lesser rate of interest than the contractual rate was objected to by all the creditors in a body and the Court thus had no option but to refuse to give its approval to the proposal.