Notice of Motion No.26 of 2008,Insolvency Petition No.43 of 2002

16th September, 2008

Petitioner Counsel: Mr. ANIL P. BAGVE
Other Counsel: Ms. REKHA SHUKLA,Mr. Y. C. PAREKH

JUDGMENT

JUDGMENT :- Heard.

2. By this Notice of Motion, the Applicants against whom the Insolvency was annulled have applied for reduction in the rate of interest determined by the Official Assignee while holding that the claimant has proved her claim. The main objection of the learned counsel is that the Official Assignee has determined interest at the rate of 18% per annum from the date of dishonour of cheques till payment.

3. The applicants were declared insolvents. Thereafter, the insolvency was annulled. At the time of annulment, an Indemnity Bond dated 31.10.2006 was submitted to this court that the Official Assignee may indemnify against any claim which may be received or included in the Schedule or any other creditor of the Official Assignee. One Vandana S. Tejwani, i.e. respondent No.2 accordingly made a claim in the petition. She submitted that the cheque dated 30.11.2000 was dishonoured on 19.4.2001 and she is entitled to sum of Rs.50,000/- along with interest at the rate of 18% per annum. Another claim under another cheque for the said amount was also made by her with the same rate of interest.

4. At the hearing before the Official Assignee, the advocate for the erstwhile insolvents left it to the Official Assignee to do the needful in the matter. Since the matter pertains to dishonour of cheques, the Official Assignee relied on the principles enumerated in Section 80 of the Negotiable Instruments Act and granted the claim with 18% per annum.

5. According to the learned counsel for the applicants, grant of interest was governed by Rule 23 of the Schedule II to the Presidency Town Insolvency Act, 1909, which reads as follows :-

"Interest.- (1) On any debt or sum certain wherein interest is not reserved or agreed, or, and which is overdue when the debtor is adjudged an insolvent and which is provable under this Act, the creditor may prove for interest at a rate not exceeding six per centum per annum-

(a) if the debt or sum is payable by virtue of a written instrument at a certain time, from the time when such debt or sum was payable to the date of such adjudication; or

(b) if the debt or sum is payable otherwise, from the time when a demand in writing has been made giving the debtor notice that interest will be claimed from the date of the demand until the time of payment to the date of such adjudication.

(2) Where a debt which has been proved in insolvency includes interest or any pecuniary consideration in lieu of interest, the interest or consideration shall, for the purposes of dividend, be calculated at a rate not exceeding six per centum per annum without prejudice to the right of a creditor to receive out of the debtors estate any higher rate of interest to which he may be entitled after all the debts proved have been paid in full."

According to the aforesaid Rule, the creditor is entitled to prove interest at a rate not exceeding 6% per annum when the debtor is insolvent. The occasion to prove interest in the present case arose at a stage after applicants had ceased to be insolvents by the annulment of their insolvency. In the circumstances, the case is covered by Sub-Rule 2 aforesaid. While determining what the highest rate of interest ought to be the Official Assignee has not committed any error of law in relying on the rate prescribed by Section 80 of the Negotiable Instruments Act since the claim arises out of a dishonour of cheques.

6. In the result, the Notice of Motion is dismissed.

Notice of motion dismissed.