PRAYAG MANDAR Vs. MUKTESHWAR PRASAD

JUDGEMENT

(1.) Both the appeals are by two sets of creditors in an insolvency proceeding. The appeals are directed against an order of Mr. V. Ramaswami I.C.S., dated 13th August 1943 in the insolvency cases Nos. n and 20 of 1933 in the district of Bhagalpur. The insolvents were a Firm J.N. Ram B.N. Ram. The application for insolvency was filed by some of the creditors. It appears that all debts entered in the schedule have been paid leaving a surplus in the hands of the receiver. The question for determination before the District Judge was payment of interest to the creditors out of the surplus left after payment of all debts entered in the schedule. This question is governed by Section 61(6), Provincial Insolvency Act (v

(5.) of 1920). The creditors contended that the interest at the statutory rate of 6 per cent. per annum as payable to them should be calculated on the respective amounts of debts entered in the schedule and the interest, was to run from the date on which the debtor was adjudged insolvent, that is 18 February 1935. Besides it had also been argued in the Court below by the creditors as the second alternative that they were entitled to the contract rate of interest from the date of adjudication up to the time of payment on the principal amount. The insolvents had urged in the Court below as they have done here that interest should be calculated not on the principal amount as mentioned in the hattchitha after the accounts had been settled between them and the creditors, as that amount included compound interest at 6 per cent, but that the previous transactions should be reopened allowing simple interest at the same rate on the principal sum advanced. Reliance had been placed by the insolvents in support of their this contention on Section 66(2), English Bankruptcy Act of 1914.

(2.) The creditors bad further argued that the word "interest" in Section 61(6) meant compound interest, and that they were accordingly entitled to compound interest at 6 per cent, on the respective amounts entered in the schedule.