Uttamchand Devchand vs Shri Ravi B. Jaising

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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
Digitally signed
by PRACHI
PRANESH
NANDIWADEKAR
Date: 2026.07.02
18:37:33 +0530
IN ITS INSOLVENCY JURISDICTION
PRACHI
PRANESH
NANDIWADEKAR
(26) OFFICIAL ASSIGNEE REPORT NO. 46 OF 2025
IN
INSOLVENCY PETITION NO. 28 OF 2001
Uttamchand Devichand Shah ….Petitioning Creditor
IN THE MATTER BETWEEN :
Bansi Jairamdas Jaising and
Ravi Bansi Jaising …..Insolvents
Ex-parte :-
Uttamchand Devichand Shah …..Petitioning Creditor
AND
The official assignee, High Court, Bombay. ….Respondent
WITH
(27) OFFICIAL ASSIGNEE REPORT NO. 47 OF 2025
IN
INSOLVENCY PETITION NO. 82 OF 2002
Suraj Prakash Khemchand ….Petitioning Creditor
IN THE MATTER BETWEEN :
Avinash Bansi Jaising and
Bansi Jairamdas Jaising ….Insolvents
Ex-parte :
Suraj Prakash Khemchand ….Petitioning Creditor
AND
The official assignee, High Court, Bombay ….Respondent
_____________________________________________________
Mr. Gaurang Mehta a/w. Ms. Rhea Mehta i/b Ms. Dipal Mehta for
Insolvent No.1 in INPT No.82 of 2002.
Mr. Aakash Desai i/by Sukanya Bhaumik for Insolvent Nos. 1 and 2 in
OAR No. 46 of 2025 and Insolvent No.2 in OAR No.47 of 2025.

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Ms. C. J. Bhatt, official assignee, present, alongwith Mr. Subodh Patil,
Deputy official assignee, present.
Ms. R.V. Rane, Insolvency Registrar, present.
Mr. Darshit K. Jain, Amicus Curiae.
___________________________________________________
CORAM : JITENDRA JAIN, J.
DATED : 2 JULY 2026
JUDGMENT :-
1. On 30 January 2026, following question was framed by the Court
for adjudication.
“ Whether the official assignee is required to satisfy the claim only on the
basis of a Decree or Order of the Court or whether the claim can be
adjudicated or satisfied on the basis of documents submitted by the
Claimant with the official assignee after a person is declared as insolvent
without there being any Decree or Order of the Court to that effect ?”
BACKGROUND:
2. A claim was lodged by the creditor with the official assignee. The
official assignee relying on certain orders of this Court stated that unless
claim is adjudicated by a Court or competent authority, she cannot
consider the same. This was objected by the counsel for the insolvent. It
was on this backdrop that above question came to be framed.
3. This Court requested Mr. Mehta and Mr. Darshit Jain, learned
counsel to assist the Court in resolving the above question. Both graciously
accepted and ably assisted the Court. The Court appreciates assistance
rendered by both counsel in answering the question.
4. Mr. Mehta appearing for Insolvent No.1 in Insolvency Petition
No.82 of 2002 has made following submissions in support of his
proposition that no decree is required for making a claim before the
official assignee.

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SUBMISSIONS OF MR. MEHTA
5. Mr. Mehta explained the scheme of the Presidency-Towns Insolvency
Act, 1909 (“the Act”) in support of his submissions.
6. Section 2(a) and 2(b) of the Act defines “creditor” and “debt”
respectively in an inclusive manner, which indicates that requirement of
possessing a decree is not a pre-condition for making a claim since only
creditor can make claim and it would include all creditors and not only
decree-holder.
7. Mr. Mehta further submitted by referring to Section 6 of the Act that
powers have been delegated to the official assignee for adjudication of the
claim and therefore, this also supports that there is no requirement of
obtaining a decree from a Civil Court for making a claim. Section 6
confers power of the Court delegated to the official assignee for
adjudication of the claim.
8. Mr. Mehta, refers to Section 9 dealing with acts of insolvency and
states that except for clauses (e) and (h) of Section 9(1), no other clause
refers to a decree though Section 9 lists down various acts of insolvency.
He further submitted that Section 9(2), which refers to a “decree” is
independent of and in addition to Section 9(1) and this also indicates that
insistence on a decree for making a claim is not justified.
9. Mr. Mehta refers to Section 12 of the Act and submits that on
satisfaction of the conditions specified therein a creditor may present the
Insolvency Court with an insolvency petition against the debtor and even
Section 12 does not refer to any decree.
10. Section 13(2)(a) of the Act which provides for order on a creditor’s
petition, refers to “debt” which is wider than a decree and therefore even

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this provision gives a clue that there is no requirement of possessing a
decree for making a claim by a creditor because if a creditor not holding
decree can file petition then certainly he is entitled to make claim.
11. Mr. Mehta, further, submitted that even if there is a decree which is
not challenged by a debtor, the official assignee has the power to go
beyond decree and reject the same for sufficient reasons.
12. Mr. Mehta, thereafter, refers to Section 17 of the Act which provides
for effect of order of adjudication. Section 17 provides for a debt provable
in insolvency and does not refer to a decree. Section 17 further bars
commencement or proceeding with legal proceedings on adjudication
order being passed except with the leave of the Court.
13. Mr. Mehta, thereafter, refers to Section 21(1) of the Act which deals
with the power of the Court to annul adjudication. He submits that on a
reading of Section 21(1) and (2), even if a debt which was earlier
disputed, on execution of a bond for payment of the same and on the
Court approving the same an order of annulment can be passed since the
disputed amount is now admitted by the debtor and he undertakes to
make payment and therefore an order of annulment follows. This
indicates non-requirement of a decree.
14. Mr. Mehta relied upon Section 24 of the Act and made reference to
Form-23 which is a schedule, verified by affidavit of insolvent, about the
assets and liabilities of the insolvent. He submitted that, on a perusal of
Form-23 and various lists referred to therein, there is no reference made
to a decree but the reference is only to a debt. He specifically emphasized
the estimate to be made of the value of bills of exchange etc. on the assets
side. The schedule refers to unsecured and secured creditors but there is
no reference to a decree or an adjudicated claim. The reference to bills of

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exchange etc. in Form-23 can be found not only on the asset side but also
on the liability side.
15. Mr. Mehta further relied upon Section 28 of the Act to contend that
even in case of composition and scheme of arrangement propounded by
insolvent, there is no distinction made between claim adjudicated and not
adjudicated but reference is only to a debt. Section 33 of the Act refers to
creditors, debtors and debts. It does not make any reference to a decree.
Section 33 specifically deals with duties of insolvent as to discovery and
realization of property.
16. Mr. Mehta, thereafter, submitted that Part-III of the Act deals with
administration of property of the insolvent and same is important for
answering the question raised herein. He submitted, that on a perusal of
Section 46 of the Act it is clear that a claim which is required to be made
with the official assignee should be only for a debt and not a decree. He
submitted that any unliquidated damages arising otherwise than by reason
of contract or breach of trust cannot be proved in insolvency proceedings
and further any debt or liability incurred after the notice of the
presentation of insolvency petition also cannot be proved in these
proceedings. Section 46(3) of the Act provides for debts which are to be
proved in insolvency proceedings and such debts and liabilities can be
present or future, certain or contingent and in respect of any obligation
incurred prior to the date of adjudication. He further submitted that, if in
the opinion of the official assignee, the value of debt or liability cannot be
fairly estimated then the official assignee is required to issue a certificate
to that effect and such debt or liability cannot enter the insolvency
proceedings. He referred to Explanation to Section 46 and contended that
the definition of “liability” is not only inclusive but is also very wide
enough to cover a debt. If the intention of the legislature was to cover

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only a decree then the definition of “liability” would have stated so and
would have been very restrictive to include only amount payable as per
the decree.
17. Mr. Mehta, thereafter, laid emphasis on Section 48 of the Act which
deals with Rules as to proof of debts and such rules are provided in
Second Schedule to the Act. The mode of proving a debt and the
procedure is specified in the said Schedule. An affidavit by the creditor has
to be filed referring to the statement of accounts showing particulars of
the debt on the basis of which claim is made. The affidavit should also
state whether the creditor is a secured creditor or an unsecured creditor.
Second Schedule to the Act further specifies the deduction to be made
from the proof of debts. Form No.45 deals with proof of debt, wherein the
creditor has to state on oath the consideration and amount of debt which
remains unpaid on the date of the order of adjudication. The said Form
also requires the creditor to annex original copies of promissory notes,
bills of exchange etc, and various other proofs in support of his claim.
18. Mr. Mehta, thereafter, relied upon Section 49 of the Act which
provides for priority of debts. Even in Section 49 the emphasis is on debts
and not on a decree.
19. Mr. Mehta pressed into service Section 53 and 54 of the Act and
contended that it is only in these two sections that the phrase “decree”
has been promulgated. He submits that, on a reading of these Sections it is
clear that the contention that there has to be a decree for making a claim
before the official assignee is contradictory to the Scheme of the Act.
20. Mr. Mehta, thereafter, referred to Section 68(1)(d) of the Act which
deals with powers of the official assignee and submitted that, with the
leave of the Insolvency Court, the official assignee may institute, defend or

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continue any suit or other legal proceeding relating to the property of the
insolvent. It is his contention relying on the decision of the Madras High
Court reported in the case of The official assignee, High Court, Madras &
1
Ors.vs. Mangalambal & Ors. that in the case of a money claim, the official
assignee cannot be brought on record in place of the insolvent in the
matters pending before the Civil Court. It is the insolvent who has to
pursue the matter on his own. The emphasis in this judgment is on the
phrase “property of the insolvent” used in Section 68(1)(d) which has
been exhaustively interpreted in the said decision. The decision of the
Madras High Court has been followed by the decision of this Court in the
2
case Om Prakash Nihalani & Anr. vs. S.M.S. Thakur .
21. Mr. Mehta also placed reliance on Section 69(1) of the Act in
support of his submission that what is to be proved is a debt for the
purpose of distribution of dividend and there is no requirement of a
“decree”. He further relied on Section 72 of the Act and contended that if
a creditor has not participated in the distribution process prior to the
declaration of dividend then he cannot disturb the distribution which has
already taken place before his participation but he can be considered for
the purpose of distribution post his participation. Referring to Rule 25 of
the Second Schedule to the Act, it is submitted that the official assignee
has the power to examine every proof in support of a debt and after
examining the same, has to either admit or reject the debt and if he
rejects the proof of debt then he has to give reasons for the same. This
indicates the power of the official assignee is akin to that of an
adjudicating authority. Mr. Mehta also relied on Rule 119 of the Bombay
Presidency Rules, 1910 which deals with the time for admission or
rejection of proof by the official assignee. The emphasis on Rule 119 is to
1 AIR 1980 MAD 200
2 2009 2 Mah. L. J. 905

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the powers of the official assignee for adjudication of the claim.
22. Mr. Mehta, learned counsel relied upon the decision of the Supreme
Court in the case of Official Receiver, Kanpur & Anr. Vs. Abdul Shakoor &
3
Ors. and the decision of this court in the case of In Re : Khushalchand B.
4
Daga to contend that the official assignee has the power of examining the
claim and for that to take evidence on record. The official assignee,
thereafter, has to take a decision on whether to accept or reject the claim.
This clearly indicates that a claim made with the Official Assignee need
not be only on the basis of a decree.
23. The learned counsel, Mr. Mehta further relied upon the decision of
this Court in the case of Mandvi Co-operative Bank Ltd. & Anr. Vs. Anant V.
5
Hegade . The issue before the Court was that an adjudication order was
passed on a petition by a creditor. Subsequently, the said creditor's claim
was settled. Whether, in these circumstances, the other creditors can be
substituted in place of the original petitioning-creditor, who had filed the
original petition. The Court, after analyzing various provisions of the Act,
came to the conclusion that once an order of adjudication is passed, then
that order is for the benefit of not only the petitioning creditor, but also for
all the creditors and, therefore, even if the petitioning creditor may have
settled his claim, the proceedings have to continue qua the other creditors.
Similar view was taken by another decision of this Court in the case of In
Re : Ramavatar Kunjilal Gupta and Sanjay Ramavatar Gupta, Ex parte :
6
Sicom Ltd . .
24. Mr. Mehta, thereafter, relied upon the division bench judgment of
this Court in the case of Akshay D. Thakkar vs. Kotak Mahindra Bank Ltd.
3 AIR 1965 SC 920
4 1966 Mah. L. J. 179
5 AIR 2007 Bombay 50
6 2009 (3) Mah. L. J. 901

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& Anr. In that case, the debtor was declared as an insolvent.
Subsequently, an application for annulment was made and an order of
annulment was passed on an incorrect premise that there were no other
creditors. In the appeal, the Court observed that the insolvent has
suppressed the fact that there were other creditors and after considering
the provisions of Sections 2, 9, 21 and 46 of the Act, the Court held that
once an order of adjudication is passed, annulment cannot be granted
unless all the creditors have been settled. Settlement with petitioning
creditor does not entitle annulment. This decision, according to Mr.
Mehta, supports the plea that for a claim to be made before the official
assignee, a creditor need not hold a decree. The division bench has
affirmed the decision of Single Judge in the case of Mandvi Co-operative
Bank Ltd. (supra) and Ramavatar Gupta (supra).
25. In view of above submissions, he contended that insistence of
decree by the official assignee is erroneous.
SUBMISSIONS OF MR. JAIN, AMICUS CURIAE:-
26. Mr. Jain, amicus adopted the submissions made by Mr. Mehta and
further submitted that the Insolvency and Bankruptcy Code (IBC)
provisions are more or less pari materia with the Presidency Towns
Insolvency Act, 1909. He tendered a table showing the similarity in
various material provisions of these Acts.
27. The reason why he relied on the comparative chart is to bring to the
notice of this Court decision of the Hon’ble Supreme Court in Swiss
8
Ribbons Private Limited & Anr. vs. Union of India & Ors. . He particularly
relied upon paragraphs 79, 82, 88 and others and submitted that the
7 Appeal No.583 of 2019 in Insolvency Petition No.5 of 2010 decided on 31 March 2021
8 2019 (4) SCC 17

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Resolution Professional (RP) is not a judicial authority and the claim made
before the RP can be challenged in appeal. He further submitted that once
Sections 7 or 9 are triggered then the only way to withdraw the same
would be by obtaining consent of 90% of the creditors. The reason why
this decision has been relied upon is to show that once an adjudication
order under the present Act is passed against a person declaring him to be
an insolvent on a petition filed by even one creditor, effect would be that
such an order would be an order in rem and thereafter it will be for the
benefit of all the creditors of that insolvent.
28. Learned counsel, therefore, submitted that even on this ground, the
decision of this Court in the case of Amarpreet Kaur Chadha (supra)
cannot be said to be good law. He, therefore, pleaded that for making a
claim before the official assignee, there is no requirement of having a
decree or final adjudication order by a Competent Court and same is
neither borne out from the provisions of the Act or Rules but on the
contrary such an insistence would be contrary to the Scheme of the Act.
ANALYSIS AND CONCLUSIONS:-
29. The present controversy arose because the official assignee relied
upon certain orders of the Insolvency Court and contended that unless
there is a decree or order of the appropriate Court/adjudicating authority,
the claim made by the creditor cannot be considered. It was on this
backdrop that the above question of law was framed for consideration of
this Court.
30. At the outset, it is made clear that only issue which is posed for my
consideration is whether for making claim by the creditor with the official
assignee is it mandatory that such a claim should be based only on the
basis of a decree or final adjudication order. No other issue other than

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above is addressed by me in the present order. Also, reference to decree in
the present order would not only include decree as understood in civil
proceedings but would mean final adjudication order passed by competent
forum under various Acts determining monetary liability against the
insolvent.
31. For answering the above question, it is necessary to briefly analyse
the Scheme of the Presidency-Towns Insolvency Act, 1909.
ANALYSIS OF THE ACT
32. As per Section 3 and 4 of the Act, the High Court at Bombay has
jurisdiction in insolvency matters and such jurisdiction is to be exercised
by a Single Judge.
33. Section 6 of the Act provides for delegation of powers to officers of
the Court for hearing insolvency petitions, holding public examination,
making any order, deciding ex-parte application and summoning any
person. Section 7 of the Act empowers the Court to decide all questions of
priorities and all other questions which may arise in any case of insolvency
which comes within the cognizance of the Court or which the Court deems
it necessary to decide for doing complete justice or for the distribution of
property.
34. Section 9 of the Act deals with acts of insolvency. Section 9(1) sets
out various acts which would constitute acts of insolvency. Section 9(2)
provides for the commission of an act of insolvency by a debtor on non-
satisfaction of a decree. Section 12 of the Act deals with conditions to be
satisfied before a creditor files the petition and Section 13 of the Act
provides for hearing of the creditor’s petition and the passing of an order
of adjudication or dismissal of the petition.

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35. Section 14 of the Act deals with petition to be filed by a debtor and
Section 15 provides for passing of appropriate orders thereon either of
adjudication or of dismissal.
36. Section 17 of the Act provides for the effect of an order of
adjudication. It states that the property, on adjudication order shall vest in
the official assignee and shall become divisible amongst the creditors. It
further bars any remedy against the property of the insolvent except with
the leave of the Court. Section 18 of the Act provides that if there are any
proceedings pending against the insolvent in any Court, then the same
may be stayed subject to the superintendence of the Court. Section 21 of
the Act provides for annulment of adjudication order in certain cases.
37. Section 24 of the Act provides for Schedule of assets and liabilities
to be furnished by an insolvent to the official assignee. Section 26 of the
Act deals with meeting of creditors which may be called either by the
creditor or the official assignee for dealing with the property of the
insolvent. Thereafter, Section 27 of the Act provides for public
examination of the insolvent.
38. Section 38 of the Act provides for the discharge of the insolvent and
Section 39 provides for cases in which the Court must refuse an absolute
discharge.
39. Part III of the Act comprising Sections 46 to 76 of the Act deals with
administration of property. Section 46 provides for debts which have to be
proved in insolvency proceedings. If the official assignee is not able to
estimate the value of the debt or liability, then a certificate to that effect
has to be issued. Section 48 read with the Second Schedule of the Act and
the Rules thereunder provides for the mechanism to prove the debts.
Section 49 of the Act provides how the property of the insolvent should be

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distributed amongst the creditors. Sections 53 to 57 of the Act provides for
enquiry into antecedent transactions. Section 58 of the Act provides for
possession of property by official assignee and appropriation thereof for
the benefit of creditors. Section 68 of the Act provides for duty and powers
of official assignee as to realization of the assets of the insolvent. Section
71 of the Act deals with calculation of dividends.
40. Part IV provides for the role of official assignee and power to
administer oath and duties of an official assignee as regards the insolvent’s
conduct. Section 83 provides for name of the official assignee for suing.
41. The Scheme of the Insolvency Act appears to be that if a person
commits an act of insolvency and is adjudicated as an insolvent, then it
would result into his assets being vested in the official assignee, who is an
officer of the Court. The petition for declaring a person as an insolvent can
be made by the debtor himself or any of his creditor. Once an order of
adjudication is passed, legal proceedings against insolvent may be stayed
and the official assignee takes steps for realizing the assets and
distributing the same amongst the creditor as per the Act.
ANALYSIS OF THE SITUATIONS IN WHICH THE ISSUE MAY ARISE:
42. The question raised for my consideration would arise only in case of
the following two situations :-
SITUATION A :
Where on the date of adjudication order under the Act, the
creditor has not taken any legal proceedings for recovery of
the amount due from the insolvent.
SITUATION B :
Where on the date of adjudication order under the Act , the

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creditor has taken legal proceedings but there is no final
adjudication order or decree , by the court/ authority
before which it is pending, on that day.

SITUATION A :
43. I now propose to deal with the first situation A viz., where the
creditor has not taken any legal steps for recovery of the sum due on the
date of adjudication order under the Act.
44. The contention of the official assignee that, for making a claim
there has to be a decree or order of the Court or of a competent authority
cannot be accepted on a harmonious reading of the Scheme of the Act
which is analysed hereinafter.
45. Section 2 (a) of the Act defines “creditor” to include a decree holder.
If the intention of the legislature was that only a decree-holder creditor
should make a claim, then the definition clause would have expressly said
so and would have been very restrictive. The definition is inclusive and,
therefore, not only a decree holder, but also all other persons who claim to
be a creditor of the insolvent would be governed by the provisions of the
Act. Similarly, the definition of debt is an inclusive definition and so is the
definition of debtor which includes a judgment debtor and all three
definitions need to be interpreted harmoniously. The scheme of the Act
from the time of filing petition to its closing refers to creditor and not
decree-holder.
46. The definition of creditor has also to be interpreted in line with
definition of “liability” in Explanation to Section 46 of the Act dealing with
administration of property, which is very widely worded to include every
possible debt due by the insolvent.

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47. The decision of this court in the case of Mandvi Co-op Bank Ltd.
(supra) has interpreted section 2(a) of the Act and observed that same
being inclusive definition would include creditor claiming under hire
purchase agreement and would be entitled to pursue insolvency petition
though original petitioning creditor’s dues who was decree-holder were
settled.
48. The inclusive definition of creditor also came up for consideration
before the division bench of this Court in the case of Jugalkishore Saraf vs.
9
Raw Cotton Co. Ltd. . This Court after referring to Section 9 of the Act and
the Bombay amendment of 1948 came to the conclusion that assignee of a
decree holder would be covered by the definition of “creditor” since it is
an inclusive definition, in addition to other reasoning.
49. The Madras High Court in the case of Enforcement Directorate
10
(FEMA), Rep. by its Deputy Director vs. T.T.V. Dhinakaran , in paras 52
and 53 observed as under :-
“52. The word "includes as pointed out by the Hon'ble Supreme Court has
been used with a intent to impart wider meaning to the terms defined. We
should also be alive to the various developments in law since the enactment
of the Presidency Towns Insolvency Act, 1909, more than a century ago.
Various other Forums, Tribunals and alternative Dispute resolution
mechanism have been put in place and those Forums and Tribunals have
been empowered to decide legal disputes and have been empowered to
pass orders for payment of money. Therefore, at this distant point of time,
we do not think that we should restrict the meaning of the words appearing
in Sections 2(a) and 2(b) of the Presidency Towns Insolvency Act, 1909 and
deprive the other creditors from invoking the provisions of the Act.
53. We therefore answer the point No. 1 to the effect that in view of the
inclusive definition adopted in Section 2(a) and 2(b) of the Presidency
Towns Insolvency Act, 1909, the terms creditor, debt and debtor defined
thereunder should be given a wider meaning and it cannot be restricted to
a decreed debt or a debt payable under order of a Court.”
9 AIR 1955 Bom 77
10 2023 SCC OnLine Mad 6659

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50. If a non-decree holder creditor can lodge petition for insolvency
then certainly insistence of a decree at the time of lodging claim with the
Official Assignee is erroneous and in that situation non-decree holder
creditor’s entitlement conferred by the Act for lodging petition would
render otiose because he would never file a petition if he is not going to
get any relief by excluding him from making a claim. Insistence of a
decree or a final order would make Insolvency Court as Execution Court
which is not the purpose of the enactment of the Insolvency Act.
51. Section 9(1) of the Act provides for various acts of insolvency.
Section 9(2) provides for an act of insolvency when a debtor does not
satisfy the decree. The scheme of Section 9 gives a clue that it is not in all
cases that a creditor should be a decree holder, but it is only one of the
cases mentioned in Section 9 for commission of an act of insolvency. The
reference to a decree in Section 9(1) can be found only in clauses (e) and
(h) and not in other clauses. Though provision of section 9 provides for
acts of insolvency, the necessity of holding a decree under section 9(2) is
only one of the act and not the only act and that too is in addition to those
provided in section 9 (1) of the Act.
52. Section 12 of the Act provides for the conditions on which a creditor
may file a petition of insolvency and the condition is that the debt owing
by the debtor to the creditor should amount to five hundred rupees and
the debt is a liquidated sum payable immediately or at some future time
and the act of insolvency should have occurred within three months
before filing the petition. In the case of a secured creditor, he should
specify whether he is willing to relinquish his security in the event of the
debtor being declared as an insolvent. If the intention of the legislature
was that only a decree holder should file a petition, then it would have
provided for the same as the only condition in Section 12 of the Act.

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Therefore, if a non-decree holder creditor can file a petition, then it
cannot be accepted that such a non-decree holder creditor or any other
creditor cannot file a claim with the official assignee.
53. Similarly, Section 14 of the Act provides for conditions to be
satisfied by a debtor to file a petition for declaring himself as an insolvent.
Section 14(1) of the Act provides for three alternative contingencies in
which a debtor can file a petition viz., where the debt amounts to five
hundred rupees or debtor is arrested and imprisoned in execution of a
decree for the payment of money or there is an order of attachment in
execution of a decree against the property of the debtor. The first
alternative condition is of a debt of Rs. 500 and debt would include sum
payable not only under a decree but under contract etc.
54. Section 13 and 15 of the Act provides for the orders to be passed by
the Insolvency Court on a petition filed by the creditor or a debtor. Even
in these sections it is not a pre-condition that there has to be a decree for
passing an adjudication order. The Court has to only see whether an act of
insolvency has been committed, which are specified in Section 9 of the Act
and are discussed above wherein I have already observed that holding a
decree is one of the acts and not the only acts of insolvency. On the
contrary, Section 13 and 14 of the Act provides for the Court to satisfy
itself with respect to the proof of the debt which includes not only a
judgment creditor or a decree holder but also all the debts payable by the
debtor to its creditors.
55. Section 17 of the Act provides for effect of an order of adjudication
of a person as an insolvent. On an adjudication order being passed no
creditor to whom insolvent is indebted in respect of any debt which has to
be proved in insolvency can take any legal proceedings or commence any

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18
suit. Even this provision clearly shows and supports the conclusion that
there is no requirement of holding a decree for making a claim. If
contention of the official assignee is to be accepted then such creditors
who have not initiated legal proceedings would never be able to recover
because section 17 prohibits them from initiating legal proceedings for
recovery and the official assignee will not entertain their claim de hors the
decree. Such an interpretation cannot be accepted and would run contrary
to the object and scheme of the Act and would take away rights of such
creditors which can never be the object of the Act.
56. The insolvent has to submit a Schedule under Section 24 of the Act
of his assets and liabilities in Form-23. On a perusal of the said Form, the
insolvent has to provide details of all the creditors, liabilities, assets etc
and not only of a decree holder. The object of this Schedule is to assist the
official assignee to realize the assets of the insolvent for distribution
amongst the creditors. List A of the said Form provides for details of the
unsecured creditors. The particulars of any bills of exchange etc held by
any creditors should be mentioned below the name and address of the
creditor. Similarly List G provides for details of bills of exchange,
promissory notes, etc available as assets of the insolvent and their
estimated value. List B provides for details of secured creditors and one
finds a mention in column 4 to “amount of debt” and not of a “decree”
only. Similarly, details of preferential creditors have to be provided in List
D. In my view, on a perusal of Form No.23 which is required to be
furnished under Section 24 of the Act by the insolvent, the requirement is
that the debtor should be indebted to the creditor either by way of holding
a decree or otherwise.
57. Section 25 deals with power of the Court to pass protection order
protecting insolvent from arrest or detention. Sub-section (4) entitles any

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19
creditor to oppose such grant of protection order. It is important to note
that this right is given to any creditor and not to a decree holder only. This
indicates active participation of all creditors in the insolvency proceedings.
58. Section 26 of the Act provides for a meeting of creditors after the
order of adjudication under the Act is passed either on an application of a
creditor or of the official assignee to consider the Schedule of assets and
liabilities of the insolvent and to deal with the property of the insolvent.
Creditor is defined in section 2(a) of the Act which I have analysed above,
to include not only a decree holder but also any other person to whom the
insolvent is indebted. Therefore, Section 26 also indicates that there is no
necessity to have a decree in the hands of a creditor for participating in
the proceedings post order of adjudication. This also indicates that the
meeting has to be of all creditors and not only decree holder.
59. Section 27 of the Act provides for public examination of the
insolvent and sub-section (3) provides that “any creditor” who has
tendered a proof may question the insolvent concerning his affairs and the
causes of his failure. The phrase “any creditor” would include not only a
decree holder but also any person to whom the insolvent is indebted.
60. Sections 28 to 32 of the Act deal with scheme of arrangement by an
insolvent after an order of adjudication, for satisfaction of his debts. Such
scheme shall be submitted by the official assignee to each creditor who
has proved his debt and these creditors have a right to agree or to dissent
from such proposal. The phrase used in Section 28 is “each creditor” and
“any creditor” which clearly indicates that the creditor need not be a
decree holder only. Section 29(4) provides that if the Court is of the
opinion that the proposal or scheme of arrangement is not for the benefit
of general body of creditors then the Court shall refuse to approve the

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20
proposal. The phrase “to benefit general body of creditors” clearly directs
to all creditors including a person holding a decree.
61. Section 33 of the Act provides that an insolvent shall provide a list
of debtors and creditors and all the debts due to and from them
respectively and assist the official assignee in realizing his property for
distribution of the proceeds amongst his creditors. Section 33 of the Act
nowhere provides that the insolvent has to give details only of a decree
holder-creditor and such decree holder-creditor is only entitled to
distribution of the proceeds. The phrase used in Section 33 of the Act is
“creditor” which is defined in Section 2 (a) of the Act to include not only a
decree holder but even other creditors as analyzed by me above while
dealing with the definition.
62. Section 39 of the Act provides for situation in which the Court must
refuse an absolute discharge of insolvent. Section 39(2) of the Act
provides for refusal of discharge, if the insolvent has put any creditors to
unnecessary expense by a frivolous defence to any suit brought against
him. Here also the emphasis is on a suit by any of the creditor which
clearly establishes that possession of decree is not a pre-requisite for
making the claim before the official assignee.
63. Section 46(3) of the Act provides for all debts and liabilities, present
or future, certain or contingent to which the debtor is subjected to on the
date of him being declared as an insolvent or by reason of any obligation
incurred before the adjudication order. Similarly, Section 46(4) of the Act
provides for the official assignee to estimate a value of the debt and if it is
not possible to do so, then to issue a certificate. Explanation to Section 46
defines “liability” in its broadest sense. In my view Section 46 supports the
submission that it is not only the decree holder but even other creditors

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21
including non-decree holder who can participate in the insolvency
proceedings with regards to the distribution of dividends realized from the
assets of the insolvent. Section 46 read with Schedule II does not provide
for a decree as a pre-condition for proving the debt. There is no much
difficulty in estimating value in case of a decree but such a contingency
would arise only in case of a claim not supported by a decree or final
order.
64. Part III of the Act provides for administration of property and
Section 46 provides for the manner in which the debts have to be proved
by a creditor so as to be entitled to the distribution of dividends arising
out of realization of the property of the insolvent. The phrase used in the
part III is “debts” and not “a decree holder”
65. Rule 23 of the Second Schedule to the Act caps rate of interest at six
percent per annum and provides that, only if any assets remain after
discharge of all liabilities then a higher rate may be paid. All liability
would cover liability under a decree as well as those not supported by a
decree. Rule 25 of the Second Schedule requires the official assignee to
examine every proof and the grounds of the debt and thereafter, in
writing, admit or reject the whole or in part or call upon the creditor to
furnish further evidence in support of his claim. If the official assignee
rejects a proof, he shall do so by giving reasons in writing to the creditor.
This also indicates that a creditor who does not hold a decree can make a
claim before the official assignee and prove his debt and the official
assignee after examining the proof of debt can either accept or reject the
same. This would govern only those cases where there is no decree. If
submission of official assignee is to be accepted then this provision would
become redundant.

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22
66. Rule 123 of the Bombay Insolvency Rules provides that every bills of
exchange, hoondee, promissory note etc. shall be exhibited before
payment of dividend and the amount of dividend paid shall be endorsed
thereon. This indicates that claim based on these instruments can be
considered by the Official Assignee without there being a decree of
Competent Court.
67. The issue as to whether the official assignee can adjudicate the
claim came up for consideration before the Madras High Court in the case
of The Official Assignee, High Court, Madras. VS. P. Veerasamy and
11
Others . Paragraph 30 of the said decision is reproduced hereinunder:
“30. Further, the scheme of the Act shows that the Official Assignee is entitled
to proceed by way of motion in those cases he has a money claim against a
stranger to the insolvency and it is then for the Courts to say whether the
matter is one which it is reasonable, having regard to the convenience of all
concerned to deal with on a motion or whether it should be dealt with in a
regular Suit. Only simple cases capable of easy and speedy disposal should be
so dealt with, Therefore if the matter, is complicated involving question of law
and fact with regard to title and ownership, in the discretion of the Court, the
same may have to be relegated to be agitated and adjudicated before the
appropriate forum.”
68. The division bench of the Madras High Court in the case of T.P.
Parameswaran V. The High Court of Judicature at Madras, represented by
12
its Registrar General, Chennai & Ors. in paragraph 51 observed as under:
“51. When that being the factual position and also when there is nothing in
the provisions of the Presidency Towns Insolvency Act, which necessitated the
Official Assignee to pronounce an order, as is being done in the case of
Judgment of Courts and also bearing in mind another fact that in strict sense
of the term, he is not a Judicial Officer. Further that when insolvent's property
vests in his hand as 'Owner' though only for the benefit of others and in such a
matter, he is only a litigant.”
(emphasis supplied)
11 2007 SCC OnLine MAD 542
12 2013 SCC OnLine Mad 1927

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23
69. The Privy Council in Sooniram Ramniranjandass V. Alagu Nachiyar
13
Koil observed as follows:
“4.…..It is at least clear that the present case cannot be concluded by
regarding the Official Assignee as a trial Judge whose estimate of the
witnesses' evidence must prima facie be accepted.”
70. Therefore, Scheme of the Act clearly postulates that it is not only a
decree holder but also any other creditor who has not taken any legal
proceedings prior to the date of the order of adjudication can participate
in the insolvency proceedings by making a claim with the official assignee
which is subject to verification and examination by the official assignee
resulting in either acceptance of the debt or rejection of the same. If there
is any rejection, then the Act provides for a remedy of appeal under
Section 86 of the Act. In appeal, the court if satisfied may grant leave for
commencement of any suit or legal proceedings, in which case creditor on
obtaining final adjudication order from competent authority can make a
claim with official assignee on that basis. The creditor would inform the
official assignee of such proceedings. This course would be adopted if the
court is of the opinion that claim would require detailed trial which the
official assignee is not empowered and/or competent to conduct as per the
scheme of the Act. The Act does not empower the official assignee with all
the powers of the civil court for adjudicating complex claims. The decision
relied upon by Mr. Mehta in the case of Abdul Shakoor (supra) also
supports the analysis done by me above but on the contrary the Hon’ble
Supreme Court observes that even if there is a judgment, in insolvency
proceedings it can be examined whether same was obtained by fraud etc.
However this judgment cannot be relied upon in support of the submission
that pending proceedings get transferred to the official assignee or
insolvency court for adjudication. It is only in certain exceptional cases,
the official assignee can reject decree.
13 (1939) 1 Mad L.J. 192

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24
71. It is important to note that the role of the official assignee is not to
accept the claim made by the creditor mechanically and without any
verification or examination. Even if the insolvent agrees that the debt is
payable to the creditor, the official assignee has to independently examine
and verify whether such a debt is payable at all and if so, to what extent it
is payable by the debtor to the creditor or by the insolvent to the creditor.
If the official assignee is of the view that, for any reasons in law or on
facts, the amount does not become payable to the creditor, then the
official assignee is entitled to reject the same by giving reasons in writing
and merely because the insolvent does not object to such a claim, it would
not entitle the creditor to recover any dividend from the assets of the
insolvent. There could be various reasons for the amount not becoming
payable, which the official assignee has to examine on the facts of each
case. The official assignee has to also examine whether there is any
collusion between the insolvent and the creditor in this regard and take
appropriate decision thereon. The blanket submission that once the
insolvent agrees, the official assignee has to consider the claim of the
creditor positively, cannot be accepted. This would also not be in the
interest of the other creditors if it is found that the amount is not payable
and/or due and payable to such a creditor whose debt the insolvent
admits.
72. Section 47 of the Act provides for set off, it states that where there
have been mutual dealings between an insolvent and a creditor proving or
claiming to prove a debt then sum due from one party can be set off
against sum due from the other party. The phrase “proving or claiming to
prove a debt” clearly indicates that it would govern a case of a non-decree
holder because if there is a decree then a debt is already proved and no
further proof is required except in some cases as narrated in the decision
in the case of Abdul Shakoor (supra).

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25
73. Section 48 of the Act provides for the mode of proving debts as per
Second Schedule and the rules thereunder. Second Schedule of the Act
refers to every creditor who has lodged the proof of his debt after an order
of adjudication is made. It should be accompanied by an affidavit. Form
No.45 provides for the manner in which the debt is required to be applied
for and proved. Form No.45 requires the creditor to specify the
consideration which remains unpaid or unsatisfied. The creditor has to
annex all the documents including originals in support of his claim. The
details of consideration and the manner in which the consideration arose
should also be specified. The affidavit should also specify if the creditor is
holding any security. This indicates that even a secured creditor can make
a claim in the insolvency proceedings and such a secured creditor need
not hold a decree. The creditor lodging a proof is also entitled to examine
the proof of other creditors. Rule 1 of Second Schedule of the Act refers to
every creditor to lodge the claim and not only a decree-holder.
74. Section 49(5) of the Act provides that after complying with sub-
section (1) dealing with priority of debts, all debts proved in insolvency
shall be paid rateably according to the amounts of such debts without any
preference. The phrase “all debts” shows that it is not only a decree holder
but also a creditor who has proved his debt according to Second Schedule
who would be entitled to the proportionate amount.
75. Section 53 of the Act contemplates a situation where the amount
realized prior to the date of admission of insolvency petition pursuant to
execution of a decree will not be disturbed but the benefit of such a decree
cannot be granted post the date of the admission of the insolvency petition
and a decree holder whose decree remains unsatisfied on the date of
admission will join other creditors. This indicates that insolvency
proceedings are not only for benefit of decree holder but all creditors.

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26
76. Section 54 of the Act provides for handing over of possession of the
property which was taken over in execution proceedings prior to the
adjudication order. The possession has to be delivered to the official
assignee. This indicates that post the adjudication order, the assets whose
possession is taken over prior to the said date, on the adjudication order
being passed vests with the official assignee for the benefit of all the
creditors and not only for the decree-holder.
77. Section 60(2) of the Act provides that in case of an insolvent who is
in receipt of a salary, an order shall be made by the official assignee for
distribution of such a salary amongst the creditors of so much of such
salary that can be attached in execution of a decree. This also clearly
indicates that a person who is not a decree holder but has a claim against
an insolvent is entitled to prove his debts, so as to be the beneficiary of
distribution of dividend.
78. Section 68(1)(h) of the Act deals with duty and powers of the
official assignee to refer any dispute to arbitration and compromise all
debts, claims and liabilities. The phrase “all debts, claims and liabilities”
clearly contemplates a situation where a creditor is not holding any decree
or adjudication order in his favour and the claim has not been adjudicated
by any Court or competent authority.
79. Section 69 deals with declaration and distribution of dividends and
on a reading of sub-sections (1), (4) and (5) each creditor who has proved
his debts is entitled to the dividends. There is no distinction made
between a creditor who is holding a decree and a creditor who has not
taken any legal proceedings for recovery of the dues. Similarly, Section 71
provides for calculation of dividends and refers to debts provable in
insolvency which clearly indicates that it is a case of a claim not supported

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27
by a decree or any adjudication order but has to be proved in accordance
with Second Schedule of the Act.
80. Section 72 gives a right to a creditor who has not proved debt
before declaration of a dividend. This clearly indicates that even if a
creditor has not proved his debts but if the conditions of Section 72 are
satisfied then he would be entitled to a dividend and lastly Section 74
provides that no suit for dividend shall lie against the official assignee
except on an application made by the creditor, and on the Court
permitting so.
81. Therefore, in my view, a creditor need not be a decree holder for
making a claim of his dues with the official assignee on the day the order
of adjudication is passed against a debtor declaring debtor as an insolvent.
On a reading of the Act as a whole along with the Schedule, Rules and
Forms and the object of the insolvency proceedings, in my view, a creditor
who has not initiated any legal proceedings on or before the date of the
adjudication order can make a claim before the official assignee and the
official assignee is statutorily required to examine the same independently
before admitting or rejecting the claim and any such decision should be in
writing, supported by reasons. If rejected, then same can be appealed
against and the Court if it accepts rejection may or would permit the
creditor to initiate legal proceedings by exercising its discretion and
power under Section 17 of the Act or direct the official assignee to admit
it.
SITUATION B :
82. The second situation B would arise where a creditor has filed some
legal proceedings that have not culminated into final order or decree on
the date of the adjudication. In such a case how a debt is required to be

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28
proved in insolvency proceedings so as to entitle the creditor to participate
in the distribution of dividend requires consideration, which I now
propose to discuss hereinafter which would be in addition to certain
common reasoning set out while dealing with situation A above.
83. Section 18 of the Act gives a discretion to the Court after an order of
adjudication is passed to stay any suit or other proceedings pending
against the insolvent before any Court subject to the superintendence of
the Insolvency Court. Section 18 deals with situation where the legal
proceedings are pending on the date of order of adjudication. It is
important to note that under Section 17, the moment an order of
adjudication is passed, the remedy of creditor against the insolvent for
commencement of any legal proceedings is frozen except with the
permission of the Court. However, under Section 18 with regard to
pending proceedings, the stay order is passed only “after” order of
adjudication and not “on” order of adjudication and that too, it is
discretionary power granted to the Court. Therefore, Section 18 gives a
clue that the Court may in an appropriate case either stay pending the suit
or direct such suit or other proceedings to be proceeded with under the
supervision of the Court. In such a situation, the creditor has to make a
claim with the official assignee and state the details about the legal
proceedings taken by him which were pending on the date of
adjudication. The official assignee, therefore, cannot at the time of making
the claim insist upon a decree because the proceedings are pending and
have not culminated into final adjudication order. Once the Court, before
whom the proceedings are pending, passes final order, the creditor may
intimate the same to the official assignee who will thereafter, proceed with
consideration of the claim for distribution of dividend.

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29
84. Section 18 empowers Insolvency Court to stay pending proceedings
and it could be for various reasons including insolvent to propound
composition scheme, to enable official assignee to arrive at settlement etc.
However, certainly the stay cannot be forever and same have to be lifted
on appropriate progress being made and after considering the time of the
insolvency proceedings.
85. There is no provision in the Insolvency Act where all the pending
proceedings before any forum can be transferred to the official assignee
nor does the official assignee has the power of the Civil Court or any other
forum for adjudication of the pending proceedings. It is the exclusive
domain and jurisdiction of the forum before whom the proceedings are
pending to adjudicate the same. Also matters pending before various
specialised Forums can never be transferred to Civil Court. The Insolvency
Court may request the forum for expeditious disposal keeping in mind the
completion of the insolvency proceedings and distribution of dividend in
accordance with the Act. Delegation of powers under section 6 would not
include power to decide matters pending before other forums.
86. Section 21 (2) of the Act also gives a clue that if the proceedings are
pending on the date of adjudication order and the insolvent prays for
annulment, then on furnishing a bond to pay the amount to be recovered
in any proceedings for the recovery or concerning the debt, the Court
would consider debt due to a creditor as having paid in full if same is paid
into the Court. This also indicates that the pending proceedings have to be
adjudicated finally by the appropriate forum and the official assignee
cannot take over such pending proceedings. This also indicates that there
is no requirement of a decree on the date of making the claim if the
proceedings are pending on the date of adjudication order.

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30
87. Section 39 of the Act provides for situation where the Court must
refuse an application for discharge of insolvent. Section 39 (1) (d)
requires the insolvent as a condition of his discharge to consent to a
decree being passed against him in favor of the official assignee for any
balance or part of any balance of the debts provable under the insolvency
which is not satisfied on the date of discharge and in that case, the decree
shall not be executed without the leave of the Court which leave may be
given on proof that the insolvent has discharged the acquired property or
income available for payment of his debts. Form 38 also is to the same
effect giving clue that on the date of making claim, there is no need for a
decree or final order but such can come into existence in future. This also
indicates that in case of pending proceedings, it is the appropriate forum
who has to adjudicate and pass a final order which forms the basis for
distribution subject to making a claim with the official assignee and
therefore at the time of making claim it is not a pre-condition that the
creditor should be a decree-holder.
88. Section 53 of the Act provides that a decree holder shall not be
entitled to the benefit of execution against the official assignee except in
respect of assets realised before the adjudication order. This indicates that
post the adjudication order, the decree holder has to stand in queue with
other creditors for recovery of his claim like any other non-decree creditor.
89. Section 68 of the Insolvency Act provides for duty and powers of
official assignee and it states that the official assignee with the leave of the
Court may institute, defend or continue any suit or other legal proceedings
relating to the property of the insolvent and further to refer any dispute to
arbitration and compromise all debts, claims and liabilities on such terms
as may be agreed upon. This also indicates that the pending proceedings
have to be carried further by the appropriate forum and cannot be

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31
transferred to the official assignee and on being finally adjudicated upon
can be considered by the official assignee for satisfaction of the claim at
the time of distribution of dividend but certainly at the time of making
claim, creditor need not have final adjudication order.
90. On adjudication order being passed, the official assignee may be
sued by the name of the official assignee. This indicates that the
proceedings post adjudication order have to be by making official
assignee, a party. This supports the reasoning that pending matters have to
be decided by the competent forum and not by official assignee and same
can be considered for dividend distribution.
91. Section 71 of the Act provides for calculation of dividend for
distribution of dividend. Sub-section (1) of Section 71 provides that the
official assignee shall retain sufficient assets to meet debts not yet
determined and disputed proofs or claims. This also indicates that even if
there is no decree or adjudication order by competent authority on the
date of calculation of dividend, official assignee should make provision for
the same. This could be only on the basis that official assignee need not
insist on final decree or adjudication order by competent authority on the
date of making claim by the creditor.
92. As per Section 78 of the Act, official assignee is empowered to
administer oath and further under Section 79 the duty of the official
assignee is to investigate the conduct of the insolvent to make reports
concerning the conduct and to give assistance in relation to prosecution of
the insolvent. Part IV which deals with official assignee does not empower
the official assignee to take upon itself the proceedings pending before
various forums on the date of adjudication order and adjudicate the same.
The said exercise has to be carried out by the appropriate forum and the

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32
final order passed thereon needs to be placed before the official assignee
for recovery of the claim.
93. Merely because the proceedings may be pending across the country
before various forums cannot be a ground to contend that the Insolvency
Court or the official assignee should transfer the pending proceedings to
itself and adjudicate the claim. This is not borne out from the Scheme of
the Act. Therefore, the only harmonious way of reconciling would be that
the creditor would inform the official assignee about their claim which on
the date of adjudication order is pending before various forums and the
official assignee would either keep aside certain amounts to be paid on the
receipt of final order of the adjudication authority and will factor the said
fact in calculating dividend for distribution.
94. The contention that if the pending proceedings are permitted to be
proceeded with by the adjudicating authority, then it would lead to delay
in completion of insolvency proceedings and therefore, pending
proceedings should be transferred to the official assignee or the Insolvency
Court cannot be accepted since same is not borne out from the Scheme of
the Act. The Insolvency Court, however, can request the adjudicating
authority to expedite the disposal of the pending proceedings, which
would curtail the time for completion of the insolvency proceedings. The
Scheme of the Act has analyzed above, nowhere suggest that on the date
of making claim the creditor should hold a decree or final adjudication
order but on the contrary, such a creditor has to only inform the official
assignee about the claim and it being pending before the appropriate
forum and based on the outcome of the appropriate forum’s adjudication
claim can be settled.

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33
95. Therefore even in situation B, after adjudication order under the Act
is made, creditors whose legal proceedings are pending should inform the
official assignee and make a claim which would be considered at the time
of making payment of dividend based on final adjudication order to be
passed by the forum before whom proceedings were pending. Therefore,
official assignee should entertain the claim pending final adjudication but
to await final outcome of the proceedings before distribution of dividend
or to keep aside certain amounts for satisfying future claim arising out of
adjudication orders to be passed by the competent authority.
96. Now I propose to deal with precedents relied upon by the parties.
CONSIDERATION OF DECISIONS RELIED UPON BY MR. MEHTA
97. The decisions of the Madras High Court in the case of Mangalambal
(supra) and Om Prakash Nihalani (supra) relied upon by Mr. Mehta are
not applicable to the issue raised for consideration before this Court. In
both these decisions the issue was whether the official assignee was a
necessary or a proper party in the suit relating to money claim. The court
after analyzing provisions of Section 68(1)(d) of the Act observed that
since a suit for money claim does not fall within the phrase “property of
the insolvent”, as used in that section official assignee is not a necessary or
a proper party. The issue before me is not whether official assignee is a
necessary or a proper party in a suit but the issue before me is whether a
creditor who is not a decree holder can make a claim with the official
assignee and this issue is not addressed by both these decisions and
therefore, reliance placed by the learned counsel on both these decisions
are not applicable to the issue raised for my consideration.
98. Mr. Mehta has placed reliance on the decision of this Court in the
case of Akshay D. Thakkar (supra) which in turn has confirmed the

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34
decisions of the Single Judge in cases of Mandvi Co-operative Bank Ltd.
(supra) and Ramavatar Gupta (supra) is justified. The ratio of these
judgments demonstrates that though insolvency petition may have been
filed by a decree holder but once an adjudication order is passed,
thereafter, the said order enures for the benefit of all the creditors,
whether creditors are decree holder or not. Therefore, at the time of
making a claim with the official assignee, a creditor need not hold a
decree in his favour.
99. The decisions relied upon by the learned counsel, Mr. Mehta in the
cases of Abdul Shakoor & Ors. (supra) and In Re : Khushalchand B. Daga
(supra) also supports the view which I have expressed that the official
assignee has the power to examine the claim made by the creditors after
considering the evidence and if the official assignee rejects the claim with
reasons, then it becomes the subject matter of an appeal to the Insolvency
Court. The Insolvency Court may, thereafter, allow the appeal and if the
appeal is dismissed, then the consequence would be to direct the creditor
to take appropriate legal proceedings before the appropriate forum for
determining his claim and thereafter, lodge the claim with the official
assignee. The Insolvency Court based on the facts of each particular case,
can either direct the appropriate forum for expeditious disposal of the
legal proceedings or direct the official assignee to keep aside certain
amounts for making good the claim if the creditor succeeds by obtaining
an order from the appropriate forum. However this decision does not
support the submission that in case of pending proceedings same should
be transferred to the official assignee for adjudication. I have already
discussed the decision in case of Abdul Shakoor (supra) in earlier part of
this order.

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CONSIDERATION OF DECISIONS RELIED UPON BY THE OFFICIAL ASSIGNEE
100. The first decision relied upon by the official assignee is in the case
14
of Vikas Jhunjhunwala Vs. Northwest Enterprises and Anr. . In this case,
the insolvent entered into consent terms with the petitioning-creditor
which were taken on record. In paragraph 6, the Court observed that
there is one more claim lodged with the official assignee by a private
entity for recovery of the price of goods alleged to be sold to the debtor.
However, no suit was filed and the invoices were of 2014. The Court was
of the prima facie view on the facts of that case that said claim cannot be
accepted simply on presentation of invoices since the debtor firm may
have various defences including limitation and on merits. It was in these
circumstances that the Court directed the official assignee not to
adjudicate the claim or make any payment in respect thereof. In my view,
this order does not lay down that in each and every case, there has to be
an adjudication order by a Competent Court or authority for making the
claim. I have already observed while dealing with situation A that the
claim can be made before the official assignee who will satisfy himself and
decide whether to accept or reject the claim with reasons and such a
decision is appealable to the Insolvency Court and the Insolvency Court
can, thereafter, consider whether to accept the claim or direct the creditor
to take legal proceedings for proving the claim. Therefore, in my view, this
decision cannot be relied upon for the proposition that in each and every
case before a creditor makes a claim with the official assignee, there has to
be a decree or a final adjudication order by a competent Court. In that
case, since Court was of the view that claim may be barred by limitation
directed official assignee not to make payment. The question which is
framed for consideration of this Court was not before the Court in the case
of Vikas Jhunjhunwala (supra) and, therefore, the said decision cannot be
14 Insolvency Petition No.15 of 2016 decided on 6 March 2019

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of any assistance for insisting upon a decree. Furthermore, this Court in
Manoj Arvindbhai Sukhadia (Applicant), In the matter between M/s.
15
Shreenathji Steel Yard Pvt. Ltd. Vs. Karakal Varka Varghese in paragraph
17 has observed that the decision in the case of Vikas Jhunjhunwala
(supra) stood overruled by the Division Bench of this Court in the case of
Akshay D. Thakkar (supra).
101. The second decision of this Court relied upon by the official
assignee is in the case of Amarpreet Kaur Chadha Vs. Kulwant Singh
16
Prehlad Singh Kohli . The facts of the said decision were that the
petitioning-creditor had obtained a decree against the insolvent and the
insolvency petition was filed under Section 9(2) of the Act. The
petitioning-creditor was agreeable to settle his debt with the judgment-
debtor. The issue arose whether the adjudication order declaring judgment
debtor as an insolvent can be recalled on such settlement though there
were other claimants who have filed their claims before the official
assignee. The learned judge relying upon the decision of the Hon’ble
Supreme Court in the case of Sarat Chandra Roy vs. Harak Chand Damani
17
& Anr. rejected the contention of the other creditors to continue with
proceedings and the order of insolvency was set aside and insolvency
petition was also dismissed.
102. In my view, above decision cannot be of any assistance in support of
the submissions made by the official assignee for insisting upon a decree
before entertaining the claim by a creditor. This decision was rendered in
the context of Section 9(2) of the Act which provides for act of insolvency
on the basis of non-satisfaction of a decretal amount. Furthermore, the
learned judge rejected the contention of other creditors for continuation of
15 Notice of Motion No.5 of 2022 in Insolvency Petition No.20 of 2016 decided on 7 January 2025
16 Insolvency Rule Nisi No.6 of 2018 in Insolvency Petition No.6 of 2017 decided on 18 June 2019
17 (1973) 3 SCC 187

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the insolvency order. Two prior decisions of this Court in the case of
Mandvi Co-operative Bank Limited (supra) and Ramavatar Gupta (supra)
were not brought to the notice of the learned judge. These two decisions
lay down that once an insolvency order is passed and even if the
petitioning-creditor is settled, the insolvency order against the debtor
continues qua other creditors. The Court permitted substitution of other
creditors in place of the petitioning-creditor in the case of Mandvi Co-
operative Bank Limited (supra) . Had both these decisions brought to the
notice of the learned Judge, then the learned Judge may have taken a
different view. Also, any decision without noticing earlier decision would
be per incuriam .
103. The aforesaid decision was rendered on 18 June 2019. Thereafter
st
on 31 March 2021, division bench of this Court in the case of Akshay D.
Thakkar (supra) has examined this very issue and held that even if the
petitioning- creditor may have been settled, proceedings of insolvency do
not come to an end, but have to be proceeded further qua other creditors.
The division bench considered Sections 2, 9, 21 and 46 of the Act and
observed that there is no distinction made with respect to the debt being
adjudicated or non-adjudicated. The decision in the case of Mandvi Co-
operative Bank Limited (supra) and Ramavatar Gupta (supra) were cited
and approved by the division bench of this Court. Therefore, the judgment
of the division bench being post the decision of the learned single judge,
the ratio of the decision of the division bench is binding on me.
104. Therefore, the contention raised by the official assignee that there
has to be a decree for entertaining the claim of the creditor cannot be
accepted and moreso on the basis of the analysis of the Act done by me
above and in the light of the decision of the division bench of this Court.

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105. This Court in the case of Manoj Arvindbhai Sukhadia (supra) has
observed that the decision in the case of Amarpreet Kaur Chadha (supra)
stood overruled by the decision of the Division Bench of this Court in the
case of Akshay D. Thakkar (supra). Mr. Mehta, learned counsel for the
insolvent has also submitted that various grounds on the basis of which
the decision in the case of Amarpreet Kaur Chadha (supra) does not lay
down correct position in law. I do not wish to delve upon on these grounds
since it is already observed in Manoj Arvindbhai Sukhadia (supra) that
decision in the case of Amarpreet Kaur Chadha (supra) stood overruled.
106. The decision of Sarat Chandra Roy (supra) also does not lay down
the law that a non-decree holder creditor cannot make a claim. In that
case, the only issue before the Supreme Court was if the claim of the
petitioning-creditor has been paid after the specified date, whether an
order of adjudication can still be allowed to continue. The Hon’ble
Supreme Court observed that delay in promptly paying decretal amount is
no ground for continuing insolvency proceedings. From the facts narrated
in paragraph 1, it is not clear whether there were other creditors who had
made a claim with the official assignee. The issue before the Supreme
Court was not whether the official assignee is empowered to insist upon a
decree for considering the claim of a non-decree holder creditor.
Therefore, this decision also cannot be of any assistance in support of the
submission of the official assignee that there has to be a decree for making
a claim. The decision in the case of Sarat Chandra Roy (supra) is
distinguishable on facts. The decision in the case of Sarat Chandra Roy
(supra) is prior to the year 1978. Section 9(2) has been introduced after
the year 1978. Furthermore, it is settled that it is the ratio of the decision
which is binding and not what logically follows therefrom. The question
raised for my consideration was not before the Hon’ble Supreme Court

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and, therefore, same cannot be read to mean that in all cases the decision
of the Hon’ble Supreme Court applies.
107. The last decision relied upon by the official assignee is in the case of
Manoj Arvindbhai Sukhadia (supra) (Applicant), In the matter between
18
M/s. Shreenathji Steel Yard Pvt. Ltd. Vs. Karakal Varka Varghese . In that
case, the annulment was opposed on the ground of a claim made by a
creditor which was based on cancelled cheques. It was on these facts that
the Court observed that no claim can be made on the basis of cancelled
cheques nor any proceedings have been filed or were pending on the basis
of cancelled cheques and therefore, the claim was not entertained. The
learned judge further observed that the debts incurred after the order of
adjudication and before discharge are not debts provable in insolvency
proceedings and therefore, claim could not have been proved and unless
debt is proved in insolvency, even if a claim can be lodged after the
adjudication of insolvency, such a claim is not tenable. In my view, the
facts of that case were totally different and it does not lay down that in all
cases, there has to be an adjudication order or a decree for making a
claim. It was on the basis of peculiar facts of that particular case that the
Court observed that the claim itself is not maintainable. Therefore, this
decision cannot come to the rescue of the official assignee. Also I have
considered such an eventuality while dealing with situation A above.
DECISION RELIED UPON BY MR. JAIN, AMICUS CURIAE:-
108. The decision in the case of Swiss Ribbons Private Limited (supra)
relied upon by the Mr. Jain supports the view taken by me that the official
assignee cannot act as a trial court for adjudicating the dispute which are
pending before the other forums or which the official assignee feels cannot
18 Notice of Motion No.5 of 2022 in Insolvency Petition No.20 of 2016 decided on 7 January 2025

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be adjudicated by the said authority. The said decision also supports that
once an adjudication order under the Presidency Towns Insolvency Act,
1909 is passed, same would enure for the benefit of all the creditors even
if the creditor who had initiated the proceedings has been settled.
109. To conclude, in my view, insistence upon a decree or a final order by
by the official assignee at the time of making a claim in situation A and B
for detailed reasons set out above is erroneous but at the time of
distribution of dividend, in situation B and in cases where court relegates
creditor to adopt legal proceedings in situation A, would require final
decree or adjudication order passed by the competent authority to be
produced before the official assignee.
110. Before parting I once again appreciate the assistance provided by
Mr. Mehta and Mr. Jain, learned counsel to the Court in deciding the
question raised.
(JITENDRA JAIN, J)