Dammu Vighnesam and Another vs Varanasi Lakshmi Narasingha Murty and Another

Manohar Lall, J.—This is an appeal by certain debtors against an order of the learned District Judge of Ganjam Puri, dated 9th August 1937, by which he held that the appellants before us had committed an act of insolvency and being also unable to pay their debts should be adjudicated insolvents. The proceedings began upon an application filed by the respondents, who are two creditors, on 30th April 1937 by which they prayed that the appellants should be adjudged insolvents. The main allegations in the petition were that the appellants had transferred all the immovable properties to their relations for payment of fictitious debts and that they had left their place of residence so as to place themselves beyond the reach of their creditors who were entitled to be paid their dues; there was also an allegation that the books of account Were being tampered with.

The learned District Judge took up the case on 9th August 1937, after refusing an application by the appellants for an adjournment. The oral evidence consists of one witness for the petitioners and one of the appellants Dammu Vighnesam examined himself; the appellants also placed upon the record a number of documents three of which are sale deeds, dated 16th April 1937; the fourth is a sale deed dated 17th April 1937; there are also two mortgage deeds bearing dates 17th April and 20th April of the same year. The learned Judge upon a consideration of the oral evidence and the documentary evidence adduced in the case and bearing in mind the circumstances under which the transfers were made came to the conclusion that the appellants were unable to pay their debts and that the transfers which they undoubtedly made in April 1937 were either no transfers at all or that these were transfers by which the creditors stated in these deeds were fraudulently preferred.

The learned advocate for the appellants strenuously argues before us that the order under appeal should not be allowed to stand. He argues in the first place that there has not been a proper trial of the case by the learned District Judge; he points out in particular to the Act that the record shows that the cross-examination of the first witness for the respondents was not recorded. Under the head cross-examination there is a note "nothing relevant to the issues." There would have been substance in this grievance if the learned advocate had been able to satisfy us as to the nature of the questions which were put on behalf of his client and which were disallowed or the answers whereof were not recorded by the learned Judge.

There is no grievance on this point in the various grounds of the memorandum of appeal. The attention of the learned District Judge is, however, directed to the fact that it is desirable in all cases in which the rights of the parties are being decided, and especially in appellate cases, that the record should show as accurately and faithfully as is possible in the circumstances that the proper procedure laid down by the law is being followed so that the parties litigant may not have any legitimate grievance that they are not afforded an opportunity to place their case before the Court. It was open to the learned Judge to have adopted the procedure of recording the questions which were being put in cross-examination and if irrelevant or inadmissible he could have overruled them by stating his reasons where necessary.

The record would then have shown us clearly that the appellant had no grievance at all. I have come across cases in which questions which were put by the learned advocates at the Bar were put after a great deal of deliberation and the learned Judge having overruled them as being irrelevant or inadmissible, the Appellate Court took a different view resulting in great harassment to the parties. It seems desirable therefore that all the questions unless they were frivolous or scandalous should be allowed to be put so that the advocates may also realize their responsibility for the questions which they put in the interest of their clients and that justice may appear to be duly administered. But as. I have already stated in this particular case we cannot interfere upon this ground alone because we are not satisfied that there is any grievance under which the appellants have suffered by the manner in which the cross-examination of the witness for the creditors was recorded.

It was also contended that the learned Judge ought to have granted an adjournment because the appellants were not ready on the date fixed for the trial. It is sufficient to say that the adjournment which was asked for from the learned Judge was simply in order to enable the appellants to raise some money to pay off their creditors. The petition for an adjournment is not upon the record. It appears therefore that the adjournment was orally applied for and that the learned Judge was never asked to grant time on the ground that the appellants were not ready to conduct their case. I am therefore unable to see any grievance upon this score also.

Upon the merits of the case it was contended that the materials upon the record are not sufficient to justify the order declaring the appellants as insolvents. It was rightly pointed out that an order declaring a person as an insolvent involves a certain amount of disgrace and harassment to the party and that the provisions of the Insolvency Act should be strictly observed before the stigma is placed upon a person in the position of the appellants. These observations are undoubtedly true, but the question is whether anything has been done in this case which satisfies us that the learned Judge was not correct in the view he took when he came to the conclusion that the appellants should be declared insolvents.

The evidence in the case discloses that some negotiations were going on between the respondents and the appellants for the transfer of certain houses in order to repay the debts of the former, but the negotiations fell through some time in the beginning of April 1937. The evidence of the witness for the creditors and of the appellant himself is clear upon this point. Within a few days thereafter a series of transfers mostly in favour of the female relations and the father-in-law of the appellants were entered into between 16th and 20th April 1937. All these transactions cover a sum of over Rs. 14,000 This itself was sufficient to rouse the suspicion of the learned Judge and we are not surprised that he took the view that upon these facts it must be held either that the transactions were fictitious or that they amounted to fraudulent preference of the female relations of the appellants and of their other relations without making any provision for the other creditors including the respondents. In these circumstances the authority relied upon by the learned advocate for the respondents, namely (Firm) Baijnath Rameshwar Lal Vs. Atal Prasad Kumar and Others, is a clear answer to the contention of the appellants. It was pointed out in that case that in order to make Section 6, Clause (b) applicable it has only to be shown that the debtor transferred his property with a view to defeat or delay his creditors, and in order to make Clause (o) applicable it has to be shown (1) that there was a transfer of property in favour of a creditor or creditors; (2) that the debtor was unable to pay his debts when he made the transfer, (3) that the transfer was with a view to give a creditor or creditors preference; and (4) that the transfer was within three months of the date of the presentation of the petition.

In my opinion all these elements are present in the present case. The words, it might also be remembered, with intent to defeat or delay the creditors" or having a "view to give preference to a creditor" are mental acts and can only be determined if one looks into the surrounding circumstances. For instance, if a man who is in serious pecuniary difficulties, his debts surpassing his assets, transfers a considerable portion of his properties or transfers properties in favour of some of the creditors having made no provision at all for the payment of debts due to others, a Court upon the facts of that case may come to the conclusion that the transfers were made with intent to defeat or delay the creditors or with a view to give preference to a particular creditor. In this case the appellant when he gave his evidence was silent and deliberately avoided asserting that he was able to pay his debts.

10 All that he said was that "we promised to pay them when our zamindar creditors should pay us."

But it was contended vehemently by the learned advocate for the appellants that the respondents should not be allowed to rest their case upon an allegation which is not to be found in their pleadings. He pointed out that the respondents relied upon the allegation that all the transfers were farzi and he argues therefore that when the transfers, upon the materials such as they are, cannot be held to be farzi it was not open to the learned Judge to allow the respondents to change their case and rest it upon a different situation, namely, that the transfers were real transfers but amounted to a fraudulent preference of some creditor to the others.

He relied upon a case of the Madras High Court, Kondappa v. Pullappa AIR (1929) Mad 910, but the decision of that case has to be examined with reference to the facts of that case. That case lays down no new principle. It is well established by a number of decisions of their Lordships of the Judicial Committee that a Court should be careful to see that cases are decided in accordance with the pleadings or upon the facts proved at the trial but consistent with the allegations made in the pleadings; in other words, a variation between pleadings and proof ought to be carefully watched to see that the opposite party is not taken by surprise. For instance, if the nature of the case is entirely altered from the case made out in the pleadings, the plaintiff must fail or if the case put forward by the plaintiff is found to be false in all the material allegations which he has made, it is not open to the Court to grant relief upon the case made by the defendant, because that case of the defendant is really an answer to the case set up by the plaintiff.

In this particular case I do not think that there is such a variation in the case set up by the respondents as would justify us in holding that they ought not to be allowed to get a declaration that the appellants have committed an act of insolvency. The respondents always insisted that the transfers evidenced by the seven documents of April 1937 have obstructed them in realizing their dues. If the transfers are farzi the property still has to be reached by a declaration that the transfers are farzi and this would ordinarily be done by a protracted litigation. If the transfers are real, the properties covered by those deeds are blaced beyond the reach of the creditors and they have shown that no arrangements have been made for their dues and the appellants are unable to meet their just dues. Therefore I do not think that in the present case the principle laid down by the Madras High Court in Kondappa v. Pullappa AIR (1929) Mad 910 can at all be applied. The true test to apply in such cases is whether the alleged insolvent is in a position to pay his debt, and whether the property which has been transferred bears such a proportion to the whole property that the remaining or the residue of the property is still sufficient, from the point of view of an ordinary business man, to meet the debts of the creditors who remain unsatisfied. Applying these tests to the present case. I am satisfied that the appellants are unable to pay their debts and that the property which has still been left with them which is chiefly in shape of loans which they have advanced to certain zamindars, is not of such a character or of such value as to justify us in holding that it is at all sufficient to meet the debts of all their creditors which exceed Rs. 12,000.

Having considered all the circumstances of the case, I am unable to say that the judgment appealed from is erroneous and should be set aside. The issue in the case was comparatively simple and depended upon the appreciation of very short evidence of two witnesses only and therefore, as pointed out by their Lordships of the Judicial Committee, where the issue is plain and simple and depends upon an appreciation of oral evidence in the case, the Appellate Court should be slow to reverse the decision of a Court which has seen and heard the witnesses. I myself would have come to the same conclusion if I had heard the evidence myself. Having given the case my most anxious consideration in view of the paucity of the evidence on the record I am unable to interfere with the decision of the learned District Judge. The appeal is dismissed with costs; hearing fee one gold mohur.

Fazl Ali, J.

I agree.