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TMI Blog1959 (10) TMI 17X X X X Extracts X X X X X X X X Extracts X X X X ..... d some vouchers with the present petitioner, Shri Brij Lal Palta. No other records of the company were recovered. Shri Brij Lal Palta, the petitioner before me, has filed this application purporting to be under section 529 of the Companies Act, 1956. He has felt aggrieved by the order of the official liquidator rejecting his claim for Rs. 3,450 against the company. The case of the present petitioner is that he was neither a shareholder of the company nor in any way concerned with it. In March 1952, there was a fire in the office of the company at Kotkapura and a case was registered in the police as foul play was suspected. The directors of the company and some creditors approached him at Faridkot, where he lived, to intercede and as a result of his good offices he succeeded in settling the dispute between the company and its creditors. The company was not financially sound and though he had no concern with the company and was not personally interested in any shareholder or creditor, he agreed to advance a sum of Rs. 4,300 to the company so that with the amount provided by him and such other funds as the company could find, the claims of the creditors might be satisfied. He stated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of April, 1952, in the cash book which had been made by him. It is to the effect that Shri Brij Lal Palta of Faridkot had paid Rs. 4,300 according to the instructions of the managing director Shri Ram Nath Chopra and the sum had been taken for payment to the creditors of the company. This amount will be deemed as deposit ( amanat ) with the company and would be returned to the petitioner at the time of the final settlement or earlier when the amount is recovered from Amin Chand Jain and others. Besides the cash book mentioned above, there is no other document showing that any advance had been made by the petitioner. It is admitted in this case that no resolution was passed by the directors regarding this advance said to have been made by the petitioner and he had obtained no receipt from the managing director or any other employee or office-bearer of the company. In cross-examination P.W.-1, Mool Chand, has admitted that there was no meeting held of the board of directors and no resolution was passed as to the manner in which disbursements had to be made to the creditors. He stated that after the disbursement of the monies to the creditors, the cash book was made over to the petit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e had never asked the petitioner to intercede in the affairs of the company, that Mool Chand had no authority to borrow on behalf of the company, and that he was not aware if the petitioner had advanced any money to the company and had never asked Mool Chand, P.W.-1, to borrow any funds from the petitioner. When his attention was drawn to the entries relating to Rs. 4,300 in the cash book at page 45, he denied having authorised it and that he was not aware of the transaction. He stated that he learnt about this entry after 1st of April, 1958, and the cash book which was maintained and kept by Mool Chand was never brought to his notice as the company had closed down. In cross-examination this witness admitted that the petitioner had been approached to get the matter settled, and that he had spent a month-and-a-half at Kotkapura in order to settle the disputes between the different creditors and shareholders of the company. He said that no payments had been made to the creditors in his presence. The petitioner is an educated man and argued the case personally. As he was not assisted by any counsel, I heard him fully and gave him considerable latitude. The petitioner has struck me t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... To a case like the present when an insolvent company is being wound up, the same insolvency rules prevail and are observed, as in the case of bankruptcy of an individual, vide section 529 of the Companies Act, 1956, corresponding to section 229 of the Indian Companies Act, 1913. Even if the entry exhibit P.W.-2/3 in the cash book of the company made in the hand of P.W.-1, Mool Chand, is deemed to amount to admission by the insolvent which really is not it is open to this court to go behind it and refuse to admit a proof founded upon it, if the claim appeared to it to be not bona fide. It is not only the right but it is also the duty of the court to go behind any entries or accounts stated or agreements or even judgment in order to ascertain the real character of the transaction and in order to find out whether the debt on which the proof is founded had been really incurred. If the circumstances appear to the court to be suspicious, it should require the person making the claim to prove the consideration and on his failure to do so, reject his claim. The power of the Insolvency Court to go behind a judgment and to inquire into the consideration despite the fact that the judgmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny number of judgments to be obtained by default against him by his friends or relations without any debt being due on them at all; it is, therefore, necessary that the consideration of the judgment should be liable to investigation." In Ex parte Revell : In re Tollemache [1884] LR 13 QBD 720, it was held that an admission of a debt, contained in a bankrupt's statement of his affairs made after the commencement of the bankruptcy proceedings, was not evidence as against his creditors of the existence of a debt, even though the statement was verified by his oath and he had since died. Reference may also be made to Lennox, ex parte : In re Lennox LR [1885] 16 QBD 315 and In re Van Laun : Ex parte Chatterton [1907] 2 KB 23 . In the last mentioned case, Buckley L.J. at page 31 said : "It is well settled that the court can inquire into the consideration for a judgment debt . . . Whether the creditor alleges that there has resulted, and that he relies upon an account stated, or a covenant entered into by the debtor, or a judgment which he has obtained, the principle, I apprehend, is exactly the same, and is this that the trustee is not the person who has stated the acc ..... 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