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TMI Blog1962 (3) TMI 50X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 1,00,000. Raja Sharda Narayan Singh Company took all the twenty debentures of the second series. It may be mentioned that the company, namely, Raja Sharda Narayan Singh Company, was a partnership consisting of only two partners, the husband, and the wife Raja Sharda Narayan Singh, the husband, and Rani Shashi Prabha Kumari, the wife. The fact that the twenty debentures of the second series were actually recorded in the name of Raja Sharda Narayan Singh Company is not disputed and was never disputed. From the official liquidator's report dated 29th April, 1959, and the third resolution recorded at the meeting of the board of directors dated the 28th February, 1950, as also from the account books of the company it was clear that Raja Sharda Narayan Singh had paid the consideration for these debentures, i.e., a sum of Rs. 1,00,000, and that the said sum had been duly credited in the books of the company on the 23rd June, 1950. By a notice dated the 7th December, 1956, Sri Bijay Shankar, an advocate, wrote to the official liquidator, under instructions from Raja Sharda Narayan Singh, laying claim against the U.P. Oil Industries Ltd. (in liquidation), in respect of eigh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tures of the second series to give a valid discharge was raised, was their incapacity to produce the debentures for being cancelled as discharged. The debentures were "bearer" debentures and it was contended on behalf of the official liquidator that bearer debentures could be negotiated by mere handing over of the debentures and, therefore, unless and until the debentures were produced or their loss satisfactorily established the official liquidator would have no protection against any claims that may subsequently be made by holders of those debentures, the debentures having been negotiated. It must in this connection be clearly seen that the right of the appellants being the debentureholders when those debentures were issued was not disputed, and further that that right of being the original debentureholders stood on a different footing from their right to be able to give a valid discharge in respect of those debentures at the time when the question of giving a discharge arose. As we pointed out earlier, the official liquidator never challenged the assertion of the appellants that they were debenture holders, for indeed, at one stage, the official liquidator was prepared to pay up ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he shall, before being entitled to have his debt entered in the schedule, state in his proof the particulars of his security, and the value at which he assesses it, and shall be entitled to receive a dividend only in respect of the balance due to him after deducting the value so assessed. (4) Where a security is so valued, the court may at any time before realisation redeem it on payment to the creditor of the assessed value. (5) Where a creditor, after having valued his security, subsequently realises it, the net amount realised shall be substituted for the amount of any valuation previously made by the creditor, and shall be treated in all respects as an amended valuation made by the creditor. (6) Where a secured creditor does not comply with the provisions of this section, he shall be excluded from all share in any dividend." From the afore-quoted section it is plain that a secured creditor had three options. The first one was that he could realise his security, and if there was something left due to him then he could come and prove for the balance. The second option that he had was to give up his security and come into liquidation ranking with other creditors and take h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the appellants deposited in cash with the official liquidator the sum of Rs. 27,428 which they had offered to do within the time mentioned by them. After all this had been done, the question was raised whether the appellants could set off the value of their debenture holdings of the second series. That question was specifically raised by one Beni Prasad Agrawal, who claimed to be the debentureholder of the third series. The question that was raised was that the appellants could not be permitted a set-off of their holdings of the second series unless they could establish to the satisfaction of the court that they were able to give a valid discharge in respect of those debentures. The question, as to whether or not the appellants were in a position to give adequate discharge in respect of the debentures of the second series, therefore, became the main question in controversy between the official liquidator, on the one hand, and the appellants, on the other. The learned company judge had, as we noticed earlier, decided the question against the appellants by his order dated the 4th October, 1960. The matter went back to him for re-decision and he has again held by the order under app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eeting and he has signed these minutes. So it was contended on behalf of the official liquidator before the learned company judge and before us that Raja Sharda Narayan Singh could not be heard to say that the debenture scrips had not been received by Thakur Kedar Nath Singh. The afore-quoted portion of the minutes of the 23rd October, 1952, did not make two things clear, first, that the record that was made was in respect of the debentures of the second series, and secondly, that Thakur Kedar Nath Singh had received the debentures, whatever their series may have been, as and on behalf of the appellants. It is no doubt true that it was admitted that Thakur Kedar Nath Singh was an attorney of the appellants. The debentureholders register of the company records that 20 debenture scrips of Rs. 5,000 each with interest coupons, which had been issued, were delivered to and were taken by Thakur Kedar Nath Singh on behalf of Raja Sharda Narayan Singh Company and receipt dated the 21st July, 1950, granted. The register in which the afore-mentioned fact finds a record is a book which has only 6 pages and that too not fully written. No evidence has been referred to us on which we could say ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the question of the proof of loss of the debentures of the second series, but in view of what we shall presently say such a decision by us was not called for. There is one aspect of this matter which was not considered by the learned company judge, possibly because it was not placed before him for consideration by counsel, as it was not even before us, and that was in respect of the right of the appellants to claim a set-off in respect of the debentures of the second series, assuming that in respect of those debentures the appellants could give a valid discharge. We have noticed earlier that under section 47 of the Provincial Insolvency Act a secured creditor had three options, and that this particular creditor had selected the third option, namely, of valuing his security and proving for the balance in liquidation. A creditor choosing this opinion, which we have called the third option has no right to claim that his security which he has valued should in any way be recognised in liquidation proceedings even to the extent of permitting a set-off of the value of the security in respect of a sale held in liquidation by the official liquidator of the property of the insolvent compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... em the security as contemplated by sub-section (4) of section 47 of the Provincial Insolvency Act. The position, therefore, was that, in our view, the debentures of the second series could not be relied upon by the appellants to claim a set-off in respect of the price fetched at auction or the price offered by them for the mills. We are also of the opinion that the question as to whether or not the appellants could give a valid discharge in respect of the afore-mentioned debentures of the second series was a matter which should not have been gone into in the liquidation proceedings. The appellants would have their legal rights, as they must have them, in respect of the debentures, for the fact that the debentures were actually issued to them and that they had paid good money for the same remains admitted on all hands. In view of what we have said above, we are of the opinion that this appeal must fail because in substance we are upholding the order of the learned company judge, namely, that the appellants were not entitled to claim a set-off in respect of the debentures of the second series, though on different grounds. We, therefore, dismiss this appeal but under the circumsta ..... X X X X Extracts X X X X X X X X Extracts X X X X
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