Shamshad Asif Vs. Additional District Judge and others

Case No: Writ Petition Nos. 2792, 2793, 2794, 2795 and 2796 of 1998

Judge: Kazi Ebadul Hoque,

Court: High Court Division,,

Advocate: A. F. Hassan Ariff,SB Bhandary,Sayyed Shah Hussain,Shah Md. Munir Sharif,,

Citation: 52 DLR 138

Case Year: 2000

Appellant: Shamshad Asif

Respondent: Additional District Judge and others

Subject: Bankruptcy Case,

Delivery Date: 1999-06-16


Supreme Court of Bangladesh

High Court Division

(Special Original Jurisdiction)

 

Present:

Kazi Ebadul Hoque J

Md. Muzammel Hossain J

 

Shamshad Asif……………………………Petitioner

Vs.

Additional District Judge and others……….Respondents

 

Judgment: June 16, 1999.

 

Lawyers Involved:

SB Bhandary, Advocate—For the Petitioner (In Writ Petition Nos. 2792, 2793, 2794, 2795 and 2796 of 1998).

Sayyed Shah Hussain, Advocate—For the Respondent No. 2 (In Writ Petition Nos. 2792, 2793, 2794, 2795 and 2796 of 1998).

AF Hassan Ariff with SB Bhandary and Shah Md. Munir Sharif, Advocates—For the Petitioner (In Writ Petition No. 2795 of 1998).

 

Writ Petition Nos. 2792, 2793, 2794, 2795 and 2796 of 1998.

 

Judgment

 

Kazi Ebadul Hoque J. - These five Rules were issued at the instance of the petitioner Shamshad Asif calling upon the respondents to show cause as to why orders dated 18-8-98 passed in Bankruptcy Case Nos.1 to 5 of 1998 pending in the Bankruptcy Court, Dhaka should not be declared to have been made without lawful authority and of no legal effect. At the time of issuance of Rules further proceedings of the Bankruptcy cases in question were stated.

 

2. Respondent No.2 Al-Baraka Bank (Bangladesh) Ltd. filed aforesaid five Bankruptcy Cases against the petitioner and others praying for declaring them Bankrupt, to appoint receiver to take possession of the mortgaged properties and other properties of the petitioner and other defendants and other reliefs on presentation of the plaints on 20-5-98. Court registered the cases and fixed 19-7-98 for hearing and directed plaintiff to publish the summary of the plaint and copy of the order in the Daily Ittefaq and Daily Inqilab. Thereafter on 19-7-98 Court fixed 26-7-9 for hearing about the plaint. Thereafter on 26-7-98 petitioner filed an application under section 28 of the Bankruptcy Act, 1997 praying for dismissal of the plaint. Court also directed the petitioner to produce books of accounts of his business and list of his properties and of his creditors and debtors. But the petitioner failed to comply with the said order. Thereafter on 9-8-98 the applications for dismissal of the plaints were heard and on 12-8-98 applications under section 28 were rejected. Being aggrieved by the same petitioner moved this court and obtained the Rules. In all the Rules common question of law having been raised these are being disposed of by this judgment.

 

3. Learned Advocate for the petitioner after placing the petition and other materials on record submitted that court below acted illegally in rejecting the applications under section 26 of the Bankruptcy Act, 1997 without considering that after passing of decrees against the petitioner and other guarantor mortgagor in the concerned Suits filed by the Artha Rin Adalat and execution proceedings against the same being pending bankruptcy proceeding for realisation of the decretal dues before the Bankruptcy Court were without is jurisdiction. He further submitted that after passing of the decrees by the Artha Rin Adalat the creditor respondent bank has been transformed into decree holder and no longer is creditor and the guarantor mortgagors are no longer debtors and judgment debtors and as such notices under section 9(1) (i) of the Bankruptcy Act, 1997 upon the petitioner and other guarantor mortgagors are without lawful authority and the Bankruptcy Court acted illegally in not dismissing the plaints of the Bankruptcy Suits. He further submitted that section 11 of the Code of the Civil Procedure being applicable in respect of Bankruptcy proceedings under the provisions of section 8 of the said Act Bankruptcy cases against the self same guarantor mortgagors against whom decrees were passed at the instance and in favour of the self same respondent creditor bank Bankruptcy Cases are barred by the principles of res judicata.

 

4. Learned Advocate for the respondent Bank after placing the affidavits-in-opposition submitted that after service of notices upon the petitioner by the Bankruptcy Court no written objections under section 27 of the said Act was filed by the petitioner in any of the cases and no evidence was adduced by any party and, as such, there was no scope for dismissal of the plaint under section 28 of the said Act on the basis of mere application. He further submitted that dismissal of plaint under section 28 of the said Act can be made by the Bankruptcy Court only after taking evidence from the parties and there is no scope for dismissal of the plaint on an application like rejection of the plaint under Order 7 rule 11 of the Code of Civil Procedure which has no manner of application in Bankruptcy proceedings. He further submitted that in view of the provisions of section 33 of the said Act all pending suits or other proceedings including execution proceedings between the parties would be transferred to the Bankruptcy Court and, as such, it cannot be said that merely because execution cases are pending Bankruptcy Court cannot entertain a Bankruptcy Suit against the judgment debtors. He further submitted that under clause (c) of sub-section (1) of section 12 of the said Act a Bankruptcy case is to be filed within one year from the date of occurrence of the act of Bankruptcy and under the explanation to sub-section (1) of section 28 a debtor could be a willful defaulter if he fails to pay any amount exceeding Taka 5.00 lac for one year after issuance of a formal demand and, as such, there is apparent conflict between the aforesaid two provisions and a Bankruptcy case should be kept pending for one year from the date of service of a formal demand by the creditor on the debtor for a debt exceeding Taka 5.00 lac.

 

5. After hearing the parties Court below held that formal demands made by the creditor bank were proper and valid and, as such, creditor bank has right to file the Bankruptcy Suits. It further held that defendant Nos. 1 to 4 including petitioner committed act of bankruptcy as alleged. The defendants could not produce any documents acceptable to the court that they have capacity to pay the debt and, as such, failed to prove the same. It further held that guarantor mortgagors are necessary parties and they would get opportunity to be heard. Court below further held that petitioner failed to prove anything as contemplated under the provision of section 28 of the said Act and, as such, he is not entitled to get relief of dismissal of the plaint.

 

6. Learned Advocate for the petitioner on our query stated that neither the petitioner nor any defendant filed any written objection under Section 27 of the said Act except filing an application under section 28 of the said Act by the petitioner for dismissal of the plaints. Section 28 of the said Act is as follows:-

 

“28. Dismissal of plaint.- 1) The Court shall dismiss a plaint presented by a creditor, if—

 

a) the Court is no satisfied with the proof-

 

i) such creditor’s right to present the plaint;

ii) the service on the debtor of a notice of the order fixing a date for hearing the plaint in accordance with section 22(2);

iii) the alleged act of bankruptcy, or

 

b) the debtor can satisfy the Court that—

i) he is able to pay his debts:—

ii) he is not a willful defaulter, or

 

c) the Court is satisfied that for any other cause, it is expedient that no order of adjudication should be made.

 

Explanation.— In this sub-section ‘wilful defaulter’ means a debtor who is liable for bank debt in excess of Taka. 5, 00,000.00 (five lac) for a period of at least one year after the issue of formal demand.

 

2. In the case of a plaint presented by a debtor, the Court shall dismiss the plaint if it is not satisfied about his right to present the plaint.”

 

7. From the above provision it is clear that satisfaction of the Bankruptcy Court on the basis of proof is the requirement to dismiss plaint. Petitioner having not filed written objection under section 27 of the said Act and having not adduced any evidence oral or documentary no illegality was committed by the court below in rejecting the applications under section 28 of the said Act under the provisions of sections 28 of the said Act.

 

8. Except the provisions of section 11 of the Code of Civil Procedure no other provisions of the said Act shall be applicable in respect of a Bankruptcy proceeding. So the provisions of Order 7 rule 11 of the Code of Civil Procedure has no manner of application in a Bankruptcy proceeding for rejection of the plant. The petitioner was under the misconception that the plaint of the Bankruptcy Case could be rejected on the basis of a mere application.

 

9. Section 33 of the said Act provides that notwithstanding anything contained in any other law for the time being in force, Court in which a suit or other proceeding relating to a claim for money or other property is pending against a debtor shall on proof that an order of adjudication has been made against him under this Act shall transfer the same to the Bankruptcy Court which passed the order of adjudication. The aforesaid provision clearly shows that in spite of pendency of a suit or proceeding against a debtor in any court including Artha Rin Adalat after the order of adjudication is made under section 30 of the said Act against the debtor such suit or proceeding shall be transferred to the Bankruptcy Court. Thus it is clear that there is no bar in filing a Bankruptcy case by the creditor against a debtor against whom a case is pending before any other court in respect of the self same debt.

 

10. It is true that after passing of a decree in favour of a creditor against a debtor creditor is termed decree holder and debtor a judgment debtor. But the same cannot change the character of a creditor or of a debtor and, as such, in our considered view there is bar on the part of a creditor to make a formal demand against a debtor under section 9(1)(i) of the said Act for a debt of not less than Taka 5.00 lac and, as such, there is no illegality in the formal demand made by the respondent creditor Bank on the debtors including petitioner on the basis of which Bankruptcy Cases have been started under the provisions of section 12(1)(c) of the said Act within one year from the date of occurrence of the act of bankruptcy. Act of bankruptcy in the instant cases occurred on the failure of the debtors including the petitioner on the expiry of 90 days from the date of service of formal demand for the debts made by the respondent creditor Bank on 15-12-97 the said Bank having filed the cases on 20-5-98 the cases were within time. Under the explanation to sub-section (1) of section 28 of the said Act wilful defaulter means a debtor who is liable for bank debt in excess of Taka 5.00 lac from period of at least one year after the issue of formal demand. In view of the same the Bankruptcy Court cannot decide the cases filed by the plaintiff against the defendants until one year expired. If any Bankrupty Court decides a case before expiry of one year then it would be difficult to hold a debtor a wilful defaulter in view of the aforesaid explanation. So the Bankruptcy Court shall have to wait for one year from the date of issuance of a formal demand for a Bank debt in excess of Taka 5.00 lac before passing either an order of dismissal of the plaint or order of adjudication.

 

11. A Bankruptcy case is filed by the creditor for declaring a debtor a Bankrupt. On the other hand, a creditor bank files a case before the Artha Rin Adalat against the debtor for realisation of the amount of debt with interest .Thus the nature of the two suits and issues are different. Issue before the Artha Rin Adalat in such a suit is whether the plaintiffs are entitled to recover the amount of debt from the defendants. On the other hand, issue before the Bankruptcy Court is whether plaintiff is entitled to declare the defendant a Bankrupt. In view of the same though section 11 of the Code of Civil Procedure in applicable is respect of a Bankruptcy proceeding the Bankruptcy suits are not barred by the principles of res judicata due to passing of decree by Artha Rin Adalat in favour of the plaintiff of the Bankruptcy suits and against the defendants of those suits.

 

12. In the above facts and circumstances we find no merit in these Rules.

 

In the result, all the Rules are discharged with cost at the rate of Taka 1,000.00 to be paid by the petitioner of each Rule to the contesting respondent No.2.

 

Ed.

Source : 52 DLR 138.