Madras High Court

Gayathri vs Shree Kamakshi Kaingarya Trust on 10 January, 2022

                                  IN THE HIGH COURT OF JUDICATURE AT MADRAS

                                                     Dated : 10.01.2022

                                                           Coram:

                 THE HONOURABLE MR.JUSTICE SENTHILKUMAR RAMAMOORTHY

                                               Application (IP) No.97 of 2021
                                                              in
                                                     I.P.No.13 of 2007

                Gayathri                                                        .. Applicant / Insolvent
                                                            Vs.

                1.Shree Kamakshi Kaingarya Trust
                  Rep. by its Managing Trustee,
                  Shree Kamakshi Swamigal also known
                  as Shree Sankara Shastrigal

                2.Shree Kamakshi Swamigal
                  also known as Shree Sankara Shastrigal

                3.S.Bhagyalakshmi

                4.The Official Assignee
                  High Court of Madras,
                  Chennai – 600 104.                                                    .. Respondents

This application has been filed under Order II of Insolvency Rules r/w Section 90(5) of Presidency Towns Insolvency Act, to condone the delay of 4783 days to set aside the exparte order of adjudication as insolvent dated 21.07.2008.

                                           For Applicant      : Mr.V.Jayakumar
                                           For RR1 to R3      : Mr.E.Senthilkumar
                                                                 for M/s. Sampathkumar Associates
                                           For R4              : Mrs.Uma, Official Assignee
https://www.mhc.tn.gov.in/judis



                                                           ORDER

The insolvent has filed an application to condone the delay of 4783

days in filing the application to set aside the ex-parte order of adjudication

dated 21.07.2008 in I.P.No.13 of 2007.

2. Pursuant to earlier order dated 15.11.2021, the insolvent remitted a

sum of Rs.5,72,015/- to the Official Assignee. The Official Assignee filed a

report dated 27.01.2021 acknowledging receipt of the said sum. This sum

includes the decretal amount in O.S.No.4793 of 2003, i.e. a sum of

Rs.4,50,000/-, costs of Rs.40,575/- in terms of the said decree and interest at

the rate of 6% per annum from June 2004 to February 2007 (i.e. from the date

of decree up to the date of presentation of the insolvency petition).

3. By earlier orders, the matter was adjourned so as to determine the

period up to which interest should be calculated and whether commission is

payable to the Official Assignee.

4. Learned counsel for the insolvent contended that interest is

payable only up to the date of presentation of the insolvency petition. In this

connection, he relied upon Section 51 of the Presidency Towns Insolvency

Act, 1909 and contended that the insolvency shall be deemed to relate back and https://www.mhc.tn.gov.in/judis

commence on the date of presentation of the insolvency petition. In support of

the said contention, he relied upon the following judgments:

i)U.P. Oil Mills Agency v. Saraswati Soap and Oil Mills Ltd. (AIR

1954 All. 129) and, in particular, paragraphs 5 to 8 thereof.

ii)Kerala Financial Corporation v. Official Liquidator, High

Court, [(1996) 87 Comp Cases 183 Ker].

5. As regards payment of commission, learned counsel for the

insolvent contended that commission is payable only if the Official Assignee

was involved in bringing the assets of the insolvent to sale. For this

proposition, he relied upon the following judgments:

i)K.Dhanalakshmi Ammal & Another v. T.Radha & Another,

O.S.A.Nos.26 to 28 and 183 of 2017, judgment dated 06.10.2017.

ii)A.Sardarbasha v. The Official Assignee, High Court, Madras &

Another, O.S.A.Nos.295 & 301 of 2019, judgment dated 01.04.2021.

6. In response, the Official Assignee contended that the assets of the

insolvent was valued by the Official Assignee and that it is on account of the

efforts of the Official Assignee that the sum of Rs.5,72,015/- was realized.

Therefore, it is submitted that the insolvent is liable to pay commission.

7. The creditor submits that he has not entered into a composition or https://www.mhc.tn.gov.in/judis

compromise with the insolvent and that he has diligently prosecuted the

petition by remitting necessary charges in that regard.

8. In light of the rival contentions, the first issue to be considered

relates to the payment of interest. The decree in O.S.No.4793 of 2003 does not

provide for payment of interest on the decretal amount. Learned counsel for the

insolvent adverted to the agreement of sale dated 11.05.2003 between the

creditor and the insolvent and pointed out that the said agreement also does not

provide for payment of interest in the event of default in fulfilling the

obligations under the said agreement. In cases where interest is not reserved or

agreed upon between the parties to the relevant transaction, interest liability is

determined by Rule 23 of the Second Schedule to the Presidency Towns

Insolvency Act, 1909. The said Rule is as under:

“23.(1) On any debt or sum certain wherein interest is not reserved or agreed for, and which is overdue when the debtor is adjudged an insolvent, and which is provable under this Act, the creditor may prove for interest at a rate not exceeding six per centum per annum-

(a)if the debt or sum is payable by virtue of a written https://www.mhc.tn.gov.in/judis

instrument at a certain time, from the time when such debt or sum was payable to the date of such adjudication; or

(b)if the debt or sum is payable otherwise, from the time when a demand in writing has been made giving the debtor notice that interest will be claimed from the date of the demand until the time of payment to the date of such adjudication.

(2)Where a debt which has been proved in insolvency includes interest or any pecuniary consideration in lieu of interest, the interest or consideration shall, for the purposes of dividend, be calculated at a rate not exceeding six per centum per annum, without prejudice to the right of a creditor to receive out of the debtor's estate any higher rate of interest to which he may be entitled after all the debts proved have been paid in full.

9. On perusal of the above provision, it appears that a distinction is

made between cases wherein the relevant contract provides for payment of

interest and rate of interest and contracts which do not provide for interest. In

the case at hand, admittedly, no interest is provided for in the relevant contract.

Therefore, the stipulated rate of interest in Rule 23 namely, 6% per annum will

apply. A creditor, in such cases, may prove the debt along with interest at 6%

per annum. The said 6% interest shall be payable up to the date of presentation

of the insolvency petition. However, in terms of Sub-Section 2 thereof, if a https://www.mhc.tn.gov.in/judis

surplus is available after discharging all the debts of the insolvent in full, the

creditor would be entitled to higher rate of interest. The question with regard to

payment of commission remains to be considered.

10. Order XVII, Rule 10(i) of the Insolvency Rules, 1958 reads as

under:

“10(i).The Official Assignee shall charge a commission at the rate of 7 per cent on the principal amount or value of assets collected by him in each estate and on the amounts paid to creditors in pursuance of a composition or scheme of arrangement.”

11. On examining the above Rule, it is evident that the Official

Assignee is entitled to charge a commission at the rate of 7% under the

following circumstances: