Decree holds no pre-condition for lodging insolvency claims; Official Assignee must adjudicate based on all supporting documents.

The Official Assignee (OA) refused to process claims lodged by creditors against insolvents unless the claims were backed by a formal decree or order from a competent court.

The counsel for the insolvent objected, arguing that the Presidency-Towns Insolvency Act, 1909, does not mandate a decree as a prerequisite for proving a debt.

The court examined the procedural history of these insolvency petitions dating back to 2001 and 2002 to determine the validity of the OA’s requirements for debt adjudication.

1. Whether the Official Assignee is required to satisfy a 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 after a person is declared insolvent?

Sections 2(a) and 2(b) of the Presidency-Towns Insolvency Act, 1909, provide inclusive definitions for "creditor" and "debt".

Section 46 and the Second Schedule (Rules 1-25) of the Act regarding the proof of debts allow for affidavits and documentary evidence such as bills of exchange.

The "order in rem" principle established in Akshay D. Thakkar v. Kotak Mahindra Bank Ltd., which holds that insolvency proceedings benefit all creditors, not just decree-holders.

The precedent of Official Receiver, Kanpur v. Abdul Shakoor affirmed the OA's power to go behind a decree or investigate non-decreed claims.

The court reasoned that since Section 12 allows a non-decree holder to file an insolvency petition, it would be contradictory to bar them from lodging a claim thereafter.

For Situation A (no prior legal proceedings), the court found that Sections 17 and 46 contemplate the proof of any "debt" or "liability," not just judgments, and the OA has quasi-judicial powers to admit or reject these based on evidence.

For Situation B (pending proceedings), Section 71(1) requires the OA to set aside funds for disputed or undetermined claims, proving that a final decree is not a prerequisite for the initial lodging of a claim.

The court observed that once an adjudication order is passed, it serves the interest of all creditors, and insisting on a decree would turn the Insolvency Court into a mere Execution Court.

The OA is statutorily required to examine proofs of debt independently and cannot mechanically reject claims for lack of a decree.

In cases of pending litigation (Situation B) or where the OA/Court directs the creditor to establish a complex claim, a final decree may be required before the actual distribution of dividends.

Clarified that earlier orders in Vikas Jhunjhunwala and Amarpreet Kaur Chadha were either distinguishable on facts or overruled by the Division Bench in Akshay D. Thakkar.