This appeal is directed against the order of the Official Assignee dated 8-7-1976, declining to enquire into the claim of the Bank of Bahawalpur Ltd. For the payment of Rs. 27,775.94, on the ground that a decree for the said amount had been passed against the insolvent by this Court, and as such he had no jurisdiction to look into the matter.
2. The appellant has also made an application under section 5 of the Limitation Act and/or section 90 of the Insolvency Act (Karachi Division) for condonation of delay, as admittedly the appeal is out of time. The same is supported by an affidavit of the insolvent. It is stated that the insolvent had been lying ill and as such he was incapacitated from moving, which fact is certified by Dr. M.
Akram. Mr. G. Raymond, learned counsel for the appellant, contended that even otherwise this Court has jurisdiction to extend the period of limitation under subsection (5) of section 90 of the Insolvency Act. Section 101 of the Insolvency Act (Karachi Division), 1909, provides limitation of 20 days for filing of appeal against any order or decision of the Official Assignee. It was contended that the Official Assignee performs his duties under the control of the Court, as provided under section 87 of the Act, and, therefore, the order of the Official Assignee is otherwise amenable to the jurisdiction of the Court for the purpose of enquiring into the legality or propriety of the same.
Looking to the importance of the issue involved in the case, as also the fact that the application for limitation is supported by an affidavit and a certificate from the doctor, I would condone the delay and the application is accordingly allowed.
3. Now coming to the merits of the case Mr. G. Raymond relied upon a decision of Madras High Court in the case of L. V. Narasimha Sastri v. Official Assignee (AIR 1930 Mad. 75). According to the facts of that case, the appellant, L. V. Narasimha Sastri, had obtained a decree against the insolvent, P. Kumaraswa mi Rao, on the basis of a Promissory Note which was said to have been executed by him on 28-1-1921, and was allegedly lost. As the insolvent apprehended arrest in execution of the decree, he sought the protection of the Insolvency Court. In the Insolvency Petition it was alleged that the Promissory Note, on which decree had been obtained by the appellant, was fictitious and he had also not been properly served with summons from the District Munsif's Court of Cocanada. The amount of decree was the only claim shown in the Schedule to the Insolvency Petition. The appellant attempted to prove the debt by producing the decree but the Official Assignee held that the same was not proved the Court held that there was no doubt about the powers of Official Assignee to investigate into the debts attempted to be proved before him, whatever their nature may be, and whether founded on a contract, loan or a judgment or a decree.
In arriving at the said conclusion the learned Court relied upon several English decisions.
"The rule is clearly stated by James, L. J. In Ex parte Kibble, thus; `It is the settled rule of the Court of Bankruptcy on which we have always acted, that the Court of Bankruptcy can enquire into the consideration for a judgment debt. There was obviously strong reason for this, because the object of the Bankruptcy laws is to produce the distribution of a debtor's goods amongst his just creditors. If a judgment were conclusive, a man might allow any number of judgments to be obtained by default against him by his friends or relatives without any debt being due on them at all ; it is therefore necessary that the consideration of the judgment should be liable to investiga--petition'."
It was further observed by him :- "I do not wish to lay it down as a rule that the Court should enquire into the consideration for a judgment debt when nothing is shown to justify the enquiry. I am disposed to think that prima facie a judgment ought to be considered as binding. But if a proper case is made I think the Court ought to direct an enquiry into the consideration for a judgment debt."
Cotton, L. J. At p. 725 of the said report observed as follows :--- "In bankruptcy a judgment certainly stands in a different position from that in which it previously stood as against the debtor himself, because the rights of the other creditors of the bankrupt have supervened. When a person is ui juris a judgment against him is very strong prima facie evidence against him of the existence of a debt ; if he disputes it he must satisfy the Court that there is some reason which requires that the judgment should be set aside."
"When an issue has been determined in any other Court, if evidence is brought before the Court of Bankruptcy of circumstances tending to show that there has been fraud or collusion, or miscarriage of justice, the Court of Bankruptcy has power to go behind the judgment and to enquire into the validity of the debt. But that the Court of Bankruptcy is bound in every case as a matter of course to go behind a judgment is a preposterous proposition.
While considering the issue in respect of jurisdiction of the Court of Bankruptcy, in In re : Saville, Ex Parte Savilla ((1887) 4 Morrell 277), the same learned Judge made the following observation; "It does not decide that there being a judgment, on the mere suggestion of the debtor that the judgment debt is bad, the Court of Bankruptcy is bound to go behind the judgment and enquire into the validity of the debt. There is a judgment debt. That is a sufficient debt on which to found a bankruptcy. It is true that if suggestions are made and some plausible evidence given, that the judgment debt does not really exist, the Court may well examine into it. Nothing was offered against the circumstances except the statement of the debtor, which he had ample opportunity and which it was to his interest, to bring forward before."
4. In my opinion the Madras decision and the English cases relied upon therein, fully support the case of the appellant. However, it may be mentioned that the Official Assignee would be entitled to go behind a decree of a Court only if the same is ex parte and is challenged by the insolvent) on same valid and strong grounds justifying such investigation. The Rule would not apply to the decrees passed after due contest by an insolvent.
5. The upshot of the above discussion is that the appeal is accepted and the order of the Official Assignee dated 3-7-1976 is set aside and he is directed to enquire into the claim of the Bank of Bahawalpur Ltd. On merits. There would be, however, no order as to costs.