Inherent powers of High Court to set aside orders passed under Insolvency Act.

ORDER :- This revision proceeding involves a question of some interest and importance with regard to the degree to which a Court exercising powers in insolvency could review or set aside its own order, either under powers vested in the Court by virtue of S. 5 of the Provincial Insolvency Act (V of 1920), read with S. 114, C. P. Code and Order 47, Rule 1, C. P. Code, or by virtue of its inherent powers under S. 151, C. P. Code. As I shall show presently, there is the authority of the judgment of a learned Judge of this Court in Chandramouleswaran v. Krishnaswami Naidu, AIR 1953 Mad 993 in an instance that was very similar upon the facts, for the affirmative reply to the question with regard to the power of the Court. But the matter is not free from difficulty, particularly in view of certain authorities that have been placed before me by learned counsel for the petitioner. Hence I shall first particularise the essential facts which have led up to the revision proceeding.

2. A certain petitioning creditor, one Fred, J. Dyas, filed I. P. No. 5 of 1960 before the learned Subordinate Judge of Nilgiris at Ootacamund, to have the adjudication in insolvency of the present revision petitioner (insolvent). The act of insolvency alleged was that on 7th October 1959, the insolvent had executed an alleged deed of settlement, by virtue of which he had fraudulenly gifted away or transferred all his properties, worth over Rs. 1½ lakhs in favour of his wife. The petition, which was filed on 23rd December 1959 further alleged that the insolvent was indebted to various persons including the petitioning creditor himself, and the present respondent in the revision proceeding. The petition was numbered as I. P. No. 5 of 1960 on 11th August 1960. The insolvency was notified in the Gazette as per orders of Court, and the insolvency petition was posted on 5th October 1960 for return of publication in the Fort St. George Gazette and notices duly served.

3. On 3rd October 1960, a joint memorandum was filed by the petitioning creditor and the insolvent or debtor, to the effect that the matter between them had been settled outside Court, and hence that the Court might be pleased to record the settlement and to dismiss the proceeding in insolvency. Thereupon, the hearing of the petition was advanced to that date and it was dismissed, recording the compromise, by the learned Subordinate Judge.

4. Coming to know of these proceedings, the present respondent, a creditor who was admittedly indicated as such by the petitioning-creditor him self, filed an application under Ss. 5 and 16 of the Provincial Insolvency Act read with O. 47, R. 1 and S. 151 of the C. P. Code, to the Sub Court, praying for a review of the order of dismissal, passed on 3rd October 1960, the setting aside of that order and the restoration of the application to file. He also desired to be substituted as the petitioning-creditor under S. 16 of the Provincial Insolvency Act. The Sub-Court heard and allowed this petition. The learned Subordinate Judge has pointed out that his earlier order, recording the compromise and dismissing the insolvency petition in terms of that record, was defective and amounted to an apparent error of law. That is because a petitioning creditor is not merely acting for himself, but for the benefit of the general body of creditors, whose interest also he is bound to subserve by his action to have the debtor adjudicated an insolvent. The result of such an order of Court, as the dismissal of the petition, would mean that the other creditors would not be in a position to rely on the alleged act of "insolvency, namely, the gratuitous transfer of a very substantial property, in the context of a general indebtedness to the wife of the debtor himself, shortly prior to the petition.

5. In prosecuting this revision proceeding, the debtor has relied on the following main grounds in support of his contention that the Court had no jurisdiction to pass the order which is now