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Report No. 26

Clause 70

Sub-clauses (1) to (4).-(i) They are based mainly on section 36 of the Presidency Act. There was nothing corresponding to them in the Provincial Act, as originally enacted. By section 4 of the Provincial Insolvency (Amendment) Act (Act 39 of 1926) a new section1, section 59A, was inserted therein, reproducing sub-sections (1) to (3) of section 36, Presidency Act, with certain modifications.

(ii) The clause as drafted generally follows section 36, Presidency Act, but differs from it in one important respect. There has been a controversy in the High Courts, as to whether a summons could be issued under this section to a witness who lives beyond the local limits of the court's original jurisdiction. In Dinaram Somani v. Bhim Bahadur Singh, AIR 1923 Cal 427 the Calcutta High Court held that the court could, acting under this section, issue summons against a person who could not be compelled to give evidence under Order 16, rule 19, Code of Civil Procedure, because section 36 deals with discovery of property and not with taking of testimony, and the jurisdiction conferred by the section is not, by reason of the proviso to section 90(1), Presidency Act, controlled by the provisions of the Civil Procedure Code. See also Re Pushkar Narayan Brahmwar, AIR 1953 Bom 19.

In Madras, it has been held that while no witness could be compelled to give evidence if he satisfies the requirements of Order 16, rule 19, C.P.C., he could be compelled to produce documents, as documents could be produced by him through any other person. Vide Re Abdul Rahim Saheb & Co., 54 MIA 715: AIR 1928 Mad 890; Re Viswanathan Chettiar, (1948) 1 MLA 241: AIR 1948 Mad 496, and Re Murugappa Chetty & Co. v. Official Assignee of Madras, (1948) 1 ML) 242.

In view of the provision in section 37, Presidency Act, that "the court shall have the same powers to issue commissions for the examination of any person liable for examination under section 36, as it has for the examination of the witnesses under the Code of Civil Procedure, 1908," it is desirable to make express provision, if the wider view is to be accepted. It is considered that the limitation in Order 16, rule 19, C.P.C., should not apply to courts under this Act. Necessary provision has been proposed2.

(iii) It should be mentioned that under section 59A(1), Provincial Act, unlike section 36. Presidency Act the examination can be only of third persons, but not of the insolvent himself. There is no reason why the scope of the section should be so limited. There is a distinction between an examination under section 27 of the Presidency Act and one under section 36 of the Act, the former is a public examination, and the latter a private one, in the nature of a secret proceeding taken with a view to eliciting information. Vide Learoyd v. Halifax Joint Stock Banking Co., (1893) 1 Ch 686 (692); Lakshmi v. Official Assignee of Madras, ILR 1950 Mad 895: AIR 1950 Mad 410. A provision for the public examination of the insolvent is proposed in another clause3, and his private examination is dealt with in the clause under discussion.

Incriminating questions--On this topic, see discussion in Mulla4.

(iv) Section 59A, Provincial Act, limits the power to examine under that section to courts (or officers) specially authorised. It is considered that all the insolvency courts should have this power. Necessary change has been made.

(v) It is necessary to refer to one point-the authority which can exercise this power. Under section 36 of the Presidency Act, it is the court acting on the application of the Official Assignee that can summon and examine witnesses; but under section 6(2)(e) of the Presidency Act, this power could be delegated. In the Provincial Act, section 59A confers this power on any court or officer of the court specially empowered by the State Government to summon and examine witnesses. It is now proposed, first, that this power should not be delegated (except as regards examining the witnesses in Presidency towns5) to any officer, but should be exercised by the court itself, and, secondly, that this power should be conferred upon all the courts.

The reason for this change is that under the clause as now drafted6, when there is a dispute as to the debt or title to the property, the disputes may (subject to certain restrictions) be determined by the insolvency court and need not be referred for determination to a suit. If the insolvency court decides to hear the dispute, then the application is to be treated as a suit and tried as a suit and the order to be passed as a decree and would also be appealable as a decree. Having regard to this scheme, the power to summon and examine, etc., should not be exercised by any authority other than the courts (except in Presidency towns, to the extent mentioned above).

Under sub-clause (3), the objection regarding production of a document has to be made to and allowed by the court. The Presidency Act makes the provision more elaborate, by adding that the objection may be made at the time of the court's sitting. No such elaboration seems to be necessary.

Sub-clause (5).-This is new. There should be a power in the court to decide the dispute. It has been framed in conformity with the recommendation relating to decision of claims of the7 insolvent against a third person or vice versa8.

Sub-clauses (6) to (9).-These correspond to sub-sections (4) to (7) of section 36, Presidency Act9, with this important difference that whereas under the Presidency Act, the jurisdiction to pass an order is limited to cases where the claim is admitted, the proposed provisions, conformably to what is provided above10, adds the case where the court decides the matter under its powers. Thus, the position is that the insolvency court can hold an enquiry, and make an order under sub-clauses (6) and (7), even though the claim is disputed.

The word "just" has been used in sub-clause (6) instead of the word "expedient" appearing in the Presidency Act, as the former is considered more appropriate. Compare sub-clause (7) also.

Section 59-A was inserted after the Report of the Civil Justice Committee, (1925). pp. 232-233 Cal 427.

2. The proposed provision will clarify the position. Cf. Mulla, (1958), p. 31, last line and p. 297, para. 312.

3. See clause 129.

4. Mulla, (1958), p. 292, para. 307.

5. As to Presidency Towns, see clause 110(3)(e).

6. See clause 70(5).

7. See clause 99, and notes thereto.

8. As to existing law, see Mulla, (1958), pp. 300-302 and p. 22.

9. The provisions are discussed in Mulla, (1958), pp. 22, 24, para. 26, pp. 300-302, 311, para. 331 and p. 671, para. 684.

10. See clause 70(5).

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