Ganesa Mudaliar and ors vs Annamalai and Others

Maheswaran, J.—This revision is directed against the judgment in C.M.A. 105 of 1983, on the file of the District Judge of South Arcot at Cuddalore, reversing the order passed in I.P. 15 of 1982 dismissing the petition by the insolvent to adjudicate him as an insolvent and allowing the appeal and declaring the petitioner in the insolvency petition as an insolvent. The insolvent filed a petition under S. 10 of the Provincial Insolvency Act. Respondents 1 to 5 and 7 in the insolvency petition were decree holders and the 8th respondent was a secured creditor. The insolvent is also said to be indebted to the sixth respondent in a sum of Rs. 27,000. The insolvent stated that the debts exceed to Rs. 500 and he is unable to pay. The 6th respondent remained ex parte and the other respondents contended that the insolvent is having lands valued more than Rs. 1,50,000 and also owns a house and has sufficient means to discharge the debts.

The Insolvency Court (Subordinate Judge) held an elaborate enquiry and found in the end that the insolvent has sufficient means to discharge the debt and dismissed his application. In appeal, the learned District Judge came to the conclusion that the insolvent has satisfied the court that the debts exceed Rs. 500 and that he is unable to pay the debts. In the end, he allowed the appeal and declared the petitioner in the insolvency proceedings as ah insolvent. This revision challenges that judgment of the appellate Court.

The debts of the sixth respondent was disbelieved and in my view rightly as the sixth respondent remained ex parte. But then the other debts in favour of the decree holder exceed Rs. 500. It appears to me that the Insolvency Court has misdirected itself in entering into an elaborate enquiry at that stage when the insolvent filed a petition for adjudication. Adverting to Ex. A1 a partition deed entered into between the insolvent and his sons, the Insolvency Court pointed out that the fact that the insolvent''s father was allotted a property worth only Rs. 141 while the other sons were allotted properties valued Rs. 18,000 and 13,000 and old would show that the partition deed is not true and had been created with a view to defraud the creditors. He comes to the same conclusion in respect of Ex. A2 which is a sale deed executed by the insolvent in favour of one Arunachala Mudaliar for Rs. 5,000 on 23-10-1978. The sale deed, Ex. A2 closely follows the heels of Ex. A1. He then adverts to the loan obtained by the insolvent from the Co-operative Agricultural loan Society by showing as security the properties allotted in the partition to his sons. The Insolvency Court infers therefrom that the insolvent is possessed of all these lands and that the documents Exs. A1 and A2 have been created by the insolvent to defraud the creditors. It is well-settled that even the presentation of a petition for adjudication is an act of insolvency under S. 6 of the Provincial Insolvency Act. There is also clear proof that the decree debts amount to over Rs. 500. The insolvent also says that he is unable to pay. Prima facie, he has satisfied the condition prescribed by the statute. In K.R.K.K. Krishnappa Chettiar Vs. V.V.R. Kasiviswanathan Chettiar and Others, Natesan, J. pointed out that if the conditions specified in S. 10 are satisfied, the court cannot refuse adjudication. It was further pointed out that the matter does not depend on the discretion of the court, but it is a statutory right of which he cannot be deprived by the court on the ground of abuse of process. In Mohanakrishnan v. Gopalaswami Naidu2, Ramaprasada Rao, J. as he then was, pointed out that while interpreting Ss. 10, 13 and 35 of the Provincial In solvency Act, the Court ought not to transcend the legitimate limits set by the language and content of those sections and be carried away by the unmeritorious conduct of the debtor or the dishonest attitude of his to wink at his creditors and put them into a deliberate loss. In another decision of the same learned Judge in Karmegam v. Jayaseela Chettiar 1976 T.L.N.J. 189, the learned Judge pointed out that when a person who claims himself to be a debtor wants to badge himself as an insolvent by invoking the process of law and stating that he is unable to pay his debts to his creditors, then such an overt expression of inability on the part of the debtor cannot lightly be disregarded by Courts on a priori considerations. The learned Judge further pointed out that if the court is satisfied about the inability of the debtor to pay his debts, no further proof of inability to pay one''s debt is necessary that his own solemn affirmation. The ratio of these decisions will clearly show that the courts are not bound to enter into an elaborate investigation at the stage of the presentation of the application for adjudication if the Court is satisfied that the debts exceed Rs. 500 and that the debtor is unable to pay his debts. The error committed by the Insolvency Court is to investigate into the partition deed and the sale deed and hold them that they are transactions which were intended to be in fraud of creditors. If it is intended to be in fraud of creditors, the respondents are not without a remedy. They can, before an order of discharge is secured by the insolvent, obtain the relief they require. For these reasons, I am of the view that the order of the learned appellate Judge does not call for interference. The civil revision petition is dismissed with costs.