Belated Proof of Debt under Rule 177: may be allowed but cannot disturb declared dividends; payment possible from liquidator funds.

A creditor who fails to prove a debt within the court-fixed period may apply for leave under Rule 177; the court allowed such belated proof but applied the Rule 178 principle that proof filed after declaration of dividends cannot disturb distributions already declared. The court held that late claims may nonetheless be paid out of any monies then in the hands of the Official Liquidator available for distribution. A prior denial of liability when called under statutory procedure was treated as affecting the sufficiency of evidence to be examined and adjudicated by the Official Liquidator, not as a bar to the court granting relief. Costs awarded to the Official Liquidator.

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Issues: Whether a creditor who has failed to prove his debt within the time fixed by the Court may apply under Rule 177 of the Companies (Court) Rules, 1959 for relief and, if allowed, whether such belated proof can disturb dividends already declared; and whether the applicant's claim should be rejected because he did not file his claim first with the Official Liquidator or had denied liability earlier when called upon to file a statement of affairs under Section 454 of the Companies Act.

Analysis: Rule 177 provides for court relief to a creditor who fails to file proof within the prescribed period; Rule 178 precludes a creditor who has not proved his debt before declaration of a dividend from disturbing any distribution declared prior to proof, while permitting payment out of any monies then in the hands of the liquidator available for distribution. Section 474 consequences were considered concerning exclusion from prior distributions where proof is late. Authorities holding that a creditor may prove a debt any time prior to final distribution, without disturbing previously paid dividends, were applied. The effect of a prior denial of responsibility when called upon under Section 454 was treated as a matter going to the sufficiency of the evidence for the claim, to be examined by the liquidator rather than adjudicated summarily by the Court. The procedural objection that the applicant did not first file the claim with the Official Liquidator was addressed by noting that Rule 177 expressly contemplates court relief in such circumstances.

Conclusion: The applicant is entitled to apply under Rule 177 for leave to prove his claim despite the delay; such belated proof cannot disturb dividends already declared but may be satisfied out of any funds then in the hands of the Official Liquidator available for distribution. The Official Liquidator is directed to adjudicate upon the applicant's debt according to law. Costs of Rs. 200 to be paid by the applicant to the Official Liquidator.

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