Principle of Res judicata is applicable to decision of insolvency court

Citation; AIR1933Nag373

IN THE HIGH COURT OF NAGPUR

Decided On: 30.09.1933

Appellants: Lalji and Ors.
Vs.
Respondent: Bansidhar and Ors.

Civil - Suit for declaration - Suit dismissed by lower Courts - Hence, impugned order under challenge in present appeal - Held, in present case, contention of Counsel that under Section 5 of Provincial Insolvency Act, no part of Civil Procedure Code (CPC) was applicable to proceedings under Act except rules of procedure was not accepted - Section 11 of CPC, with all its explanations would apply to a decision of insolvency Court under Section 4 of the Act - Order of District Judge uphold - Appeal dismissed.

Staples, A.J.C.

1. The appellants are the sons of persons who have been adjudicated insolvents. They brought a suit for a declaration that their shares could not vest in the official receiver, as the debt for which the decree in Civil Suit No. 56 of 1924 was obtained was contracted for immoral purposes by the insolvents. Admittedly they had preferred an objection in the insolvency Court and that objection was heard and dismissed by that Court by an order dated 17th August 1929. A preliminary objection therefore was made to their suit by the respondents that it was not maintainable in view of that order of the insolvency Court. Both the trial Court and the lower appellate Court have held that that objection is correct and that the suit is not maintainable and therefore both the suit and the appeal were dismissed. The plaintiffs have now preferred this second appeal.

2. The only question to be decided in the appeal is whether the appellants can bring a declaratory suit on a ground that was not urged by them before the insolvency Court. Admittedly they raised certain contentions before the insolvency Court, namely, that their property was ancestral and that the debts, for the satisfaction of which the property was being sold, were not taken for family benefit or for legal necessity. The insolvency Court held that, even granting that the property was ancestral and that the objectors had shares, still, as the debts were incurred by the father and grandfather and were not alleged to have been tainted with immorality, the objectors were liable, and the Judge cited Om Prakash v. Moti Ram MANU/UP/0064/1926 : AIR1926All447 and Balu Yenkata Seetharama Chettiar v. Official Receiver, Tanjore AIR 1926 Mad 994 as well as other cases. That view is, of course, correct and is not now challenged. It is further admitted by the learned Counsel for the, appellants that the decision of the Judge of the insolvency Court with regard to the objection raised by his clients was a decision under Section 4, Provincial Insolvency Act, and is final and binding for all purposes, as laid down in Clause (2) of that section.

3. The learned Counsel for the appellants however argued, firstly, that an insolvency Court was not bound under Section 4 of the Act to decide the question of title that might be raised, and further that under Section 5 of the Act the provisions of the Civil Procedure Code only apply with regard to procedure and that therefore the principle of constructive res judicata, as laid down by Section 11, Expl. 4, Civil P.C., would not apply to a decision by an insolvency Court under Section 4 of the Act. The first contention is no doubt correct, as held in Jitendra Nath v. Fateh Singh MANU/WB/0072/1922 : AIR1924Cal533 and Nayan Tara Dasi v. Sambhu Nath MANU/WB/0065/1925 : AIR1925Cal932 ; but in the present case the Judge did decide the question of title and all the questions that were raised before him at the time, and in doing so he was quite right. The second contention is, I think, quite wrong and, if allowed, would open the door to all sorts of abuses. It is, I think, clear that anyone aggrieved by an order of an insolvency Court may make an objection and invite a decision of that Court under Section 4 of the Act, or he may file a suit, but he cannot pursue both remedies ; and, if he obtains a decision of the insolvency Court under Section 4 of the Act, a suit by him with regard to the same subject-matter would be barred. Still less can a person aggrieved by an order of the insolvency Court make an objection to the order in the insolvency Court and get a decision of that Court under Section 4 of the Act and then file a suit on another ground with regard to the same subject-matter. Nor can I accept the contention of the learned Counsel that under Section 5, Provincial Insolvency Act, no part of the Civil Procedure Code is applicable to proceedings under that Act except rules of procedure. I have no hesitation, then, in holding that Section 11, Civil P. C., with all its explanations will apply to a decision of the insolvency Court under Section 4 of the Act. I therefore uphold the order of the District Judge and dismiss the appeal. Costs of the appeal will be borne by the appellants. I fix pleader's fees at Rs. 90.

Print Page