Shah Nemchand Bros. (Bankruptcy Ordinance) (Cause No. 1927) [1927] EACA 11 (1 January 1927)

## INSOLVENCY JURISDICTION.

## Before CREAN, Ag. J.

## In the matter of NAMCHAND PANACHAND SHAH, trading as "SHAH NEMCHAND BROS."

## Cause No. 14/1927.

- The Bankruptcy Ordinance, 1925 (Ordinance No. 1 of 1926)-Section 18, compositions and schemes of arrangement; Section 28, discharge of bankrupt. - **Held:**—That the Court may exercise its discretion and approve a<br>scheme even if the debtor has committed an offence under the Ordinance.

RULING.—The application before the Court is for approval of a scheme of composition in satisfaction of the debts of the bankrupts.

To the original schemes there are some amendments and the offer as it now stands is favoured and accepted by practically all the creditors of the bankrupts.

Before these amendments were added to the offer, the Official Receiver reported against the scheme, and in his report he sets out that both the bankrupts have been sentenced to terms of imprisonment for offences against the Bankruptcy Ordinance, 1925. Now, however, with the amendments to the proposal being put forward and accepted by the creditors the Official Receiver has no objection to its being approved by the Court.

The creditors seem anxious that the scheme of the bankrupts should be approved, the Official Receiver has no objection. The question, therefore, for decision is,—having regard to the conduct of the bankrupts and sections 18 and 28 of the Ordinance, can the Court give its aproval to any scheme or proposal of the debtors.

Section 28 provides that the Court shall refuse the discharge in all cases where the bankrupt has committed any offence under this Ordinance, and section 18 enacts that in any case in which the Court is required, where the debtor is adjudged bankrupt, to refuse his discharge, the Court shall refuse to approve the proposal.

At the first glance these sections appear to lay it down that it is mandatory on the Court in a case of this kind to refuse its approval of this proposal. But section 28, though it says that the Court shall refuse the discharge in a case where the bankrupt has committed an offence under the Ordinance, goes on to say. " unless for special reasons the Court otherwise determines."

On this case one of the special reasons that could be argued in favour of the approval of the offer is, that there is no opposition to it, and therefore it must be considered as reasonable and calculated to benefit the general body of creditors.

It struck me, at the outset, that however advantageous to creditors a composition or scheme may be, it ought not to be<br>approved by the Court if the bankrupt has been guilty of any offence against the Ordinance. But on considering the position I think it is the duty of the Court to have regard to the interest of the creditors, and if the composition is clearly the best thing for them I do not think that the Court is bound in law to refuse to approve it, because the bankrupt has been guilty of an offence.

The view expressed by Lord Esher M. R. (in ex parte Kearsley In re Genese. Q. B. 18 (1887) is that the Court ought to look at both sides, and not to punish the creditors by over strictness in regard to the conduct of the debtor.

From the support given to this scheme by the creditors present and from the Official Receiver, I am satisfied that it is clearly the best thing that can be done for the creditors and I therefore approve of it.

The discharge of bankrupts is granted but is suspended for two years, and in the meantime it is to be shown to Court that the terms of the proposal have been carried out.