Madras High Court

V.Balaji vs The Official Assignee on 6 October, 2025

Author: N.Anand Venkatesh

Bench: N. Anand Venkatesh

                                                                    1/11                     APPLN No. 40 of 2025




                                  IN THE HIGH COURT OF JUDICATURE AT MADRAS

                                                      DATED: 06-10-2025

                                                               CORAM

                         THE HONOURABLE MR JUSTICE N. ANAND VENKATESH

                                                    APPLN No. 40 of 2025
                                                     in IP No.79 of 2008



                V.Balaji

                                                                                                   Applicant(s)

                                                                    Vs

                The Official Assignee
                High Court, Madras.

                                                                                                Respondent(s)

                PRAYER Petition filed under Order II Rule 1 of Insolvency Rules read with
                Section 38 of the Residency Towns of Insolvency Act, to grant unconditional
                discharge to the applicant.


                                  For Applicant:             Mr.J.Balagopal

                                  For Respondent:            Mr.Gowtham
                                                             Official Assignee




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                                                                2/11                     APPLN No. 40 of 2025




                                                           ORDER

This application has been filed for granting unconditional discharge to the

applicant.

2.The applicant was adjudicated as an Insolvent by an order dated

10.07.2008. Thereafter, notice was served to all the creditors for making their

claims before the Official Assignee. After the service of notice of adjudication

to all the creditors, the insolvency petition was posted for public examination.

The public examination commenced on 24.01.2018 and it was completed. The

applicant has shown nearly 67 unsecured creditors to the tune of Rs.74,45,000/-

and the assets to the tune of Rs.50,000/-

3.The specific case of the applicant is that the administration of the estate

of the applicant has been completed long back and the applicant is continuing to

be an insolvent. It is under these circumstances, the present petition came to be

filed before this Court for the unconditional discharge of the applicant.

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4.When the matter came up for hearing on 11.08.2025, this Court took

into consideration the report filed by the Official Assignee and passed the

following order:

A report has been filed by the Official Assignee as a counter

to Appln. No.40 of 2025 filed by the insolvent. As seen from the

report of the Official Assignee, out of the 68 un-secured creditors,

only 15 un-secured creditors were served with the notices sent by

the Official Assignee and the notices sent to the remaining 53 un-

secured creditors were returned un-served.

2.This application has been filed by the insolvent seeking for

the grant of unconditional discharge.

3.Since some of the un-secured creditors have not been

served, the Official Assignee is directed to effect advertisement,

disclosing the details of the un-secured creditors to put them on

notice about Appln. No.40 of 2025 filed by the insolvent seeking

for unconditional discharge.

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Post the matter on 15.09.2025.

5.Pursuant to the above order, the Official Assignee has effected

advertisement in Malai Malar on 11.09.2025 and the same has also been placed

before this Court.

6.Heard the learned counsel for the applicant and the Official Assignee.

7.This Court had an occasion to deal with a similar case in I.P.No.65 of

2025. The relevant portions are extracted hereunder:

7. The law on the scope of Section 39 of the Act is now too

well settled. This Court has repeatedly held that the law of

bankruptcy does not expect that the debtor should always be the

slave of the creditors and that the object is to release the debtor at

the appropriate time taking into consideration several factors

referred to in Section 39 of the Act, which states that the Court has

no discretion to reject the discharge if the insolvent has not

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committed any offence either under the Act or under the IPC.

8. In so far as the second limb of Section 39 of the Act is

concerned, it is left to the discretion of the Court to refuse

discharge or suspend discharge for a specified time or grant

conditional discharge. While exercising this discretion, the Court

must take into consideration several factors set out under Section

39(2) of the Act. The objection raised by the Official Assignee, by

itself, is not a deciding factor and it is one of several

circumstances, the Court has to take into consideration while

dealing with an application for discharge.

9. In the case in hand, the applicant continues to be an

undischarged insolvent for more than 20 years and the applicant

has completed his 66th year and probably, it is high time that he is

relieved of this stigma viewed with utmost contempt by the society

at least in the evening of his life.

10. This Court had an occasion to deal with the scope of

Section 39(2)(a) of the Act in the case of N.M.Rajesh Vs. Official

Assignee, High Court, Madras [reported in 2014 (6) CTC 423]

wherein the principles were carved out at paragraph 6, which is

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extracted as hereunder :

“6. The principles laid down by our High Court

in the judgments referred to above are that

~~

(i) The proceedings in insolvency shall be dealt

with as expeditiously as possible and the creditors

shall be satisfied as expeditiously as possible from the

property of the insolvent and that the insolvent shall

then be free to start life again unburdened by his

debts.

(ii) The law of bankruptcy does not expect that

the debtor should always be the slave of the creditors,

but he has to be released at the appropriate time by

taking into consideration several factors referred to in

Section 39 of the Presidency Towns Insolvency Act.

(iii) It is the discretion of the court to refuse

discharge or suspend discharge for a specified time or

grant conditional discharge, having regard to totality

of all the factors enumerated in Section 39(2).

(iv) The absolute order of discharge does not

put an end to the administration of the insolvent-s

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property.

(v) It is for the Court to decide whether the

property should, even after annulment of

adjudication, continue to vest with the official

receiver or not. Whether the administration of the

particular insolvency is brought to an end by the

Court-s order of granting the absolute order of

discharge and is depending upon the nature of the

order made.

(vi) Once there is an unconditional absolute

order of discharge, the official receiver has no longer

power to bring any of the properties of the

ex~insolvent to sale and any dealing of the property

by the official receiver in a given situation is against

law and is liable to be set aside.

The relief sought for herein, if viewed in the light of

the principles drawn from the authorities cited above,

the same would compel this Court to grant the relief

as sought for herein.“

11. As was held by this Court in the said decision, the

applicant did not commit any act, which disentitles him to seek for

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an order of discharge. Considering the age of the applicant, the

status of the applicant need not be continued.

8.In the case in hand, the applicant continues to be an un-discharged

insolvent from the year 2008 onwards. The report submitted by the Official

Assignee at Paragraph No.15 states as follows:

15. It is submitted that in the event of admitting the above

said 11 unsecured claims for a sum of Rs.23,52,914/- with the

available amount of Rs.32,247/-. The insolvency estate is not in a

position to declare dividend of at least 0.25 paise in a rupee as

provided under section 39 (2) (a) of Presidency Towns Insolvency

Act, 1909, which is a pre-requisite for granting discharge.

9.In the light of the above development, it is high time that the applicant

is relieved of this stigma and it is also seen that the applicant did not commit

any act, which dis-entitles him to seek for an order of discharge. This Court also

takes into consideration the fact that the applicant is nearly sixty years old.

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10.In the light of the above discussion, this application is ordered as

prayed for. No Costs.

06-10-2025

Index:Yes/No Speaking/Non-speaking order Internet:Yes Neutral Citation:Yes/No ssr

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1.The Official Assignee High Court, Madras.

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