Gopal v Raja (Civil Case No. 173 of 1926; Criminal appeal No. 3 of 1927) [1927] EACA 2 (1 January 1927)

## COURT OF APPEAL FOR EASTERN AFRICA.

Before SIR T. S. TOMLINSON, C. J. (Zanzibar); PICKERING, J., and SHERIDAN, J. (Kenya).

GORDHAN GOPAL (Appellant) (Original Plaintiff) v.

POPAT RAJA (Respondent) (Original Defendant). C. A. $3/1927$ .

Res judicata, section 13 Civil Procedure Code, 1882-effect of the lodging of a proof of a claim in an insolvency cause.

$Held$ :—That the effect of the lodging of a proof of a claim in an insolvency cause does not amount to the institution of a suit.

The Judgment of the Supreme Court (Kenya) was delivered by STEPHENS, J., in Civil Case No. 173 of 1926.

JUDGMENT.—Prior to the 9th August, 1921, the plaintiff and defendant were trading in partnership under the name of "Popat Gordhan & Co", and the partnership was dissolved by mutual consent on the terms and conditions set out in the Deed of Dissolution, a copy of which is attached to the plaint.

According to the statement of claim in June, 1923, the defendant became insolvent without discharging all the debts owing by the said partnership, and in consequence thereof the plaintiff was called upon to discharge certain of the debts. These payments by the plaintiff were made during the years 1924, 1925 and 1926, and from these dates causes of action against the defendant arose. On or about 28th May, 1926, the defendant obtained an order of discharge from the insolvency in the year 1923. The plaintiff called upon the defendant to pay the total sum of Sh. $10,151/81$ which he was compelled to pay, but the defendant refused to pay anything.

In his statement of defence the defendant denies that the plaintiff was lawfully bound to pay or has paid all the debts of the partnership as stated by him. The defendant disputes in this connexion the alleged payment of the sum of Sh. 2,000 to Dayalal Naran on 6th July, 1926, and the alleged payments to F. C. Gambatta. The defendant further states that the plaintiff lodged an application on or about 25th June, 1924, for having his name inserted in the Schedule of the defendant's creditors, but the application was dismissed by the Chief Justice on or about 14th August, 1924. The defendant further states that the plaintiff's claim is barred as rcs judicata, and that in view of the circumstances set out showing knowledge on the

part of the plaintiff of the defendant's bankruptcy, the plaintiff cannot now bring this action after the defendant's discharge from bankruptcy, and the defendant further pleads that the plaintiff's claim is barred by the Statute of Limitation. The plaintiff in this case applied to have his name put on the Schedule of creditors. His application was dismissed by the Chief Justice on 14th August, 1924, owing to there being no proof of debts. He made no further application to have his name put on the schedule of creditors, and he never appealed under Sec. 46 (2) of the Provincial Insolvency Act, 1907, to the Court of Appeal for Eastern Africa, as he could easily have done and which was the proper procedure to follow, and I am therefore of opinion that the matter is now res judicata, and therefore give judgment for the defendant with costs.

From this Judgment the plaintiff appealed on the following grounds: $-$

1. The learned Judge failed to comply with the provisions of section 182 C. P. C.

2. The learned Judge erred in holding that the subject matter of the suit was res judicata.

$\mathbf{3}.$ The Judgment of the learned Judge was wrong in law.

## Schwartze for appellant.

Phadke for respondent.

SIR T. S. TOMLINSON, C. J.-I have discussed the question with PICKERING, J., whose Judgment expresses my views as well as his own. It is not therefore necessary for me to add anything.

The appeal is therefore allowed and Judgment must be entered for the appellant for the amount claimed with costs both here and below.

PICKERING, J.—The first grounds of appeal have been waived in this case, and the appeal stands as against the decision of the learned trial Judge that this claim must be dismissed, the plaintiff being held to be estopped because the claim lodged by him was res judicata. The appellant and respondent were at one time partners; the partnership was dissolved on the 9th May, 1921, and under the terms of dissolution the respondent undertook to discharge all the firm's liabilities and to indemnify the appellant against all proceedings and claims in respect thereof. In 1923 the respondent was adjudicated an insolvent and in the insolvency proceedings the appellant purported to lodge a claim for Sh. 282 in respect of four decrees obtained against him by unpaid partnership creditors. The affidavit was unintelligible. No notice that the appellant had purported to lodge proof of a claim was given either to the Receiver or to the insolvent;

the proof was scrutinized ex parts on the 14th August, 1924, by the Chief Justice, who made the following order: "There is no proof before me of the debts alleged. The application is dismissed ". Before this rejection of his proof the appellant made payments in satisfaction of the decrees and the respondent in the meantime having obtained his discharge from insolvency, lodged this suit for the recovery under the indemnification clause of the sums paid by him. He was met by the plea that his claim was res judicata in that it was the subject of the order of the 14th August, 1924, made in the insolvency proceedings. This contention was upheld by the trial Judge.

The circumstances in which a Court should refuse to entertain a claim as res judicata are set out in section 13 of the Civil Procedure Code. I am of opinion that the appellant's claim cannot be declared to be res judicata for several reasons.

The order made by the learned Chief Justice on the 14th August, 1924, was not in my opinion made in a suit cause or matter to which both the appellant and respondent were parties. The proof was scrutinized ex parts by the Chief Justice, notice of the attempt to have a claim placed on the Schedule being The act of the Chief Justice was in my given to no one. opinion a ministerial rather than a judicial act. The functions exercised by a Judge in the scrutiny of claims in an insolvency cause is of a character similar to those exercised by a Judge when dealing with applications for the execution of decrees against a debtor's property. Moreover I am of opinion that the lodging of a proof of a claim in an insolvency cause does not amount to the institution of a suit and that where the proof is scrutinized and rejected ex parte by a Judge, the proceedings in respect of the claim do not amount to a suit within the meaning of that word in section 13 of the Civil Procedure Code.

MR. PHADKE relied upon the decision in the case of Pita Ram v. Jujhan Singh. If that Judgment is carefully considered it will be found in no way to favour the respondent's contention. The learned Judge in that case, after finding that the anterior proceedings although not originated by a plaint had otherwise all the attributes of a suit, proceeded: "The question for our determination is whether under such circumstances when a claimant, who alleges that his property has been wrongfully seized under the jurisdiction conferred upon the Insolvency Court, and who has two alternative remedies for litigating his grievance, can be allowed, after having adopted one alternative and having failed upon the merits, to begin again and to raise the same issues in another Court". It is apparent that the reasons for refusing to entertain the claim of Pita Ram in the case just referred to have no application to the appellant's claim in the proceedings before us. The validity of the appellant's claim

was not directly and substantially in issue on the 14th August, 1924. The only matter towards which the Chief Justice directed his mind was towards the form of the proof. He found the proof to be unintelligible and he abstained from adding any debt to the schedule.

As a second reason for upholding the dismissal of the claim by the trial Judge Mr. PHADKE argued that by virtue of the indemnity clause the appellant was possessed of a claim provable in the respondent's insolvency, and that the respondent's liability under that clause had been discharged by his discharge from the order of insolvency. This question was considered by this Court in the case of Mahomedali Esmailji v. Abdulla Suliman Damji (8 E. A. L. R. 73), where it was decided that in proceedings under the Provincial Insolvency Act each creditor may pursue alternative courses in that he may either pursue a claim in the insolvency or he may stand aside; and that in the latter case he retains his cause of action against the debtor. That decision is binding upon us and disposes of the second ground. upon which the respondent sought to uphold the Judgment appealed against.

Finally this Court was asked to decide a question of fact. upon the record. Having perused the file I find myself satisfied that the various payments set out in the schedule annexed to the plaint were in fact made by the appellant. No suggestion has been raised that the amounts if paid by the appellant are not recoverable by the respondent. For this reason I would pass Judgment against the respondent for the amount claimed with costs in this Court and in the Court below.

SHERIDAN, J.-In this case there are three points raised on behalf of the respondent. Firstly, that the appellant's claim was res judicata. Secondly, that inasmuch as he tendered proof of his debts under section 24 of the Provincial Insolvency Act and his application was dismissed on the ground that there was no proof of debt, he was barred from bringing a suit against the appellant; and thirdly, that his claim in any event was barred by Limitation.

As regards the first point, to my mind the case does not fall within the provisions of section 13 of the Civil Procedure Code. An application tendering proof of debt cannot, I think, be considered as a suit within the meaning of that section.

The second ground also fails to support the respondent's case. Section 65 (2) of the Provincial Insolvency Act provides that an order of discharge shall release the insolvent from all debts entered on the schedule. To hold that this ground was sound would be contrary to the decision of this Court in the case of Mahomedali Esmailji v. Abdulla Suliman Damji, E. A. L. R., Vol. viii, p. 73.

The third ground I understood to have been abandoned by the respondent's Counsel. It is clear that the period of Limitation would only commence to run as from the date the appellant was damnified.

The evidence of the appellant on the amount due to him is uncontradicted.

I would allow the appeal and enter Judgment for the appellant as prayed with costs in both Courts.