Full Judgment
Buckland, J.
1. This is an application made on behalf of Ram Gopal Poddar, one of the creditors of the insolvent, Kanhya Lal Sewbux, for an order that the trustee under the composition may be directed to pay him Rs. 19,159-6-0. On the 17th December 1923 an order was made approving the terms of composition annexed to the order, under which Babu Shedmull Dalmia of 69, Cotton Street, a creditor, to the extent of Rs. 47,216, was appointed to be the trustee. The terms of composition recite two mortgages:. one in favour of Shedmull Dalmia amounting to Rs. 35,000; and the other in favour of the applicant for Rs. 15,000: and it says that those sums shall be paid first of all as soon as sufficient funds come into the hands of the trustee.
2. It is alleged that the trustee has paid away considerable sums to unsecured creditors out of the assets, of which at present Rs. 20,000 are still in his hands. The trustee admits a certain amount of assets and that he has paid sums to unsecured creditors, but says that he has paid them out of his own pocket.
3. It is objected that the applicant's mortgage which is dated 7th March 1922 has not been proved, and that until that has been done he is not entitled to be paid. This is based upon Rule 128 of the Insolvency Rules of this Court, which provides that 'every person claiming to be a creditor under any composition or scheme, who has not proved his debt before the approval of such composition or scheme, shall lodge his proof with the trustee thereunder, if any, or, if there is no such trustee, with the Official Assignee who shall admit or reject the same.' The rule concludes that no creditor shall be entitled to enforce payment under a composition unless he has proved his debt and proof has been admitted. I have also been referred to the second schedule, Rule 11, of the Insolvency Act, which says: 'If a secured creditor does not either realize or surrender his security, he shall, before ranking for dividend, state in his proof the particulars of his security, the date when it was given 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. The point is not altogether easy Jot determination, because the order approving the composition is made under the Act after it has been submitted by the Official Assignee to the creditors, and in the presence of the insolvent. In such circumstances, it may reasonably be argued that proof is not necessary, and that the order is admitted.
5. On the other hand, there is no provision either in the Act or in the rule contemplating any such position. The mere fact that the sum is payable under the composition and is stated therein to be payable does not of itself forgo the need for proof. This appears from the latter part of Rule 128.
6. Having regard to the terms of the Act and the terms of the rule, although possibly it may be superfluous, it seems to me that it is the duty of the secured creditor to lodge his proof which should be done with the trustee, now that the composition has been approved and there is a trustee.
7. It is not necessary at this stage to anticipate what may follow hereafter. It has been said that the object of insisting on proof is to obtain the benefit of the security for the unsecured creditors. That may be so. All I have to determine at present is whether or not before the money can be paid out the debt has to be proved, and in my opinion it should. I decide no more than that, and as matters stand the applicant cannot obtain the order; and I dismiss the application with costs.