Nanji v Ex Parte the Creditors D.R. Gandhi and Co (Bankruptcy Cause No. I of 1938) [1938] EACA 176 (1 January 1938)

## **BANKRUPTCY JURISDICTION**

#### Before HAYDEN, J.

## In re HABIB NANJI TRADING AS THE COASTAL AGENCY. Debtor

# Ex parte the Creditors D. R. GANDHI & CO.

### Bankruptcy Cause No. 1 of 1938

Bankruptcy-Creditors' petition-Act of bankruptcy committed through agent-Agent's authority-Substituted service-Bankruptcy Ordinance, sections 3 (1) $(h)$ and 3 (2)—Bankruptcy Rules, Rule 117.

A creditor's petition alleged that the debtor orally gave notice to the petitioning creditors that he had stopped payment of his debts. Such notice was in fact given not by the debtor personally but by his manager whom the debtor had prior to such notice instructed by letter that in the event of his being unable to pay the creditors he was to stop payment and so to inform the creditors. The manager was not in a position to pay the creditors when he received the letter as the debtor was then insolvent and he had accordingly stopped payment and informed the creditors. Substituted service of the petition was effected on the debtor through his agent in Mombasa on 2nd May, 1938, and the petition was not set down for hearing until 3rd June, 1938. The debtor who lived in Dar es Salaam had actually received the petition.

Held (24-6-38).—(1) That an act of bankrupcy can be committed through an agent provided that such act had been duly authorized by the debtor. Ex parts Gibson and Bolland (3 T. L. R 303) followed. In re Prin Ex parte (1931, 2 Ch. 70) and In re Sawers (12 Ch. D. 522) distinguished;

(2) That the substituted service of the petition on the debtor was good service having regard to section 3 (2) of the Bankruptcy Ordinance and Rule 117 of the Bankruptcy Rules. In re a Judgment Debtor Ex parts the Debtor v. Creditors (156 T. L. R. 16) and Re De Cespides (156 T. L. R. 471) distinguished.

A. B. Patel for the petitioning creditors.

Debtor absent.

ORDER.—The petitioning creditors have petitioned that a Receiving Order be made against the debtor's estate, the act of bankruptcy relied on being that the debtor on or about 22nd April, 1938, orally gave notice to the petitioning creditors that he had stopped payment of his debts. It now transpires that this notice was not given personally by the debtor but by his attorney and manager, Alibhai Rahim. My attention has been drawn to ex parte Blain; In re Sawers (1879) 12 Ch. D. 522, where portion of the headnote reads: "An act of bankruptcy must be a personal act or default, and it cannot be committed through an agent, nor by a firm as such". I consider that the decision in that case did not go further than to decide that an act of bankruptcy could not be committed by the act of an igent which the debtor had not authorized, or of which he has no cognizance. In support of this view I would quote a passage from the judgment of Brett L. J. at p. 529, which reads: "I think that a man cannot commit an act of bankruptcy by a particular act of his agent which he has

not authorized and of which act he has had no cognizance". Myview of the effect of the decision in Ex parte Blain (supra) is supported also by the learned authors of Williams on Bankruptcy (11th) Edition, p. 98). Also see 2 Hailsham, p. 16, para. 22, in In re Lamb; Ex parte Gibson and Bolland (1886) 55 L. T. 817; affirmed (1887) 3 T. L. R. 303, it was held that a notice of suspension of payment can be issued by an agent acting under the authority of the debtor. In the Indian case of In re Hurruck Chand Golicha ((1880) I. L. R. 5, Cal. 605) it was held that a trader residing out of the jurisdiction but carrying on business within the jurisdiction by a gomashta, can be adjudicated an insolvent if his gomashta does any act which, if done by the trader himself, would have rendered him liable to be adjudged an insolvent. In the present case the evidence of the debtor's attorney and manager is that prior to giving the petitioning creditors notice that payment had been stopped he received a letter from the debtor instructing him in the event of his being unable to pay the creditors to stop payment and so inform the creditors. The witness then stated he told the petitioning creditors that he had received instructions from the debtor to stop payment and had done so accordingly. He said he was not in a position to pay the creditors when he received that letter from the debtor and therefore he carried out the debtor's instructions as the debtor was not then solvent. There is the evidence of one of the partners in the petitioning creditors' firm that on the 22nd April last Ali Rahim came to his shop and said that the Coastal Agency (the name under which the debtor traded) had stopped making payments to their creditors.

On the evidence I am quite satisfied that at the time of making such announcement Ali Rahim did so with the authority and cognizance of the debtor and that accordingly such notice of suspension of payment amounted to an act of bankruptcy by the debtor under section 3 (1) $(h)$ of the Bankruptcy Ordinance, 1930.

I consider the case of In re Prince Blucher Ex parte Debtor (1931) 2 Ch. 70, is distinguishable from the present case as there the decision turned on the question of signature which is a personal act required to be performed by section 16 (1) of the Bankruptcy Act, 1914, as the section contained the words "signed by him" and the decision therein followed the reasoning derived from a consideration of the terms of the Statute of Frauds where the words are "and signed by the party to be charged therewith or some other person thereunto by him lawfully authorized". The words "or some other<br>person thereunto by him lawfully authorized" being absent from section 16 (1) of the 1914 Act. This to my mind is quite different to the giving of a notice of suspension of payment of debts under section 3 (1) $(h)$ of our Ordinance which, on the authority of the cases to which I have previously referred, I hold can be given by a debtor's agent provided the agent had been authorized, as in the present case, by his principal to give the notice in question.

As regards the question of substituted service of the petition on the debtor I hold the service to have been good having regard to the provisions of section 3 (2) of said Ordinance and Rule 117 of the Bankruptcy Rules. The case of In re a Judgment Debtor; ex parte the Debtor v. Creditors, 156 L. T. 16, has no bearing on this case, as there, where an order for substituted service of a bankruptcy petition had been made, it was known at the time of obtaining the order that the debtor could not possibly have knowledge of the proceedings against him within the stipulated time (seven days); nor has the case of Re De Cespides, 156 L. T. 471, any bearing on this case as in that case there was no indication that the notice attempted to be served could or would reach the debtor. In this case substituted service of the petition was effected on the debtor's agent on the 2nd May, 1938, and the petition was not set down for hearing until 3rd June, 1938, so that there was ample time for the agent to get into touch with his principal in Dar es Salaam and Exhibit 2 shows the petition to have been duly received by the debtor.

Having regard to the evidence adduced at the hearing and to reasons above set out I hereby make a Receiving Order against the estate of the debtor as prayed.