Gopu China Jogayya and Seshavatharam Firm vs Mamidi Satyanarayana and Others

Kunhi Raman, J.—This is an appeal from the order made by the learned District Judge of Kistna in I.A. No. 1864 of 1935 in I.P. No. 15 of

1935 on the file of his Court.

The facts are briefly as follows. On a petition presented by the first respondent, the second respondent was adjudicated insolvent on the 17th

October, 1935. Then the appellant who is one of the creditors of the insolvent applied on 7th November, 1935, for annulling the adjudication u/s

35 of the Provincial Insolvency Act. The ground alleged in the petition before the District Judge was that the debt mentioned in the petitioning

creditor''s application was a bogus debt and that consequently there was abuse of the process of the Court. The learned District Judge dismissed

the petition for a reason which cannot be supported. The order is worded as follows:

The petitioner is practically trying to make me review the order of the District Judge who adjudicated the respondent insolvent. I do not think he

can be allowed to do so and that his real remedy lies in having the debt declared void or annulled by appropriate action. The petition is dismissed.

All parties to bear their own costs.

The learned Advocate for the appellant very rightly comments on the wrong view taken by the learned District Judge. The respondents'' learned

Advocate while conceding that the reason given in the order may not be quite satisfactory, contends that in substance the order is correct though in

form it looks unsatisfactory.

The question therefore for determination is whether in substance the order made by the Court below is correct and warranted by law. It is first

necessary to bear in mind an important feature which the respondents'' learned Advocate has pointed out in the course of his arguments, namely,

that before the petitioning creditor in this case filed his petition for adjudicating the second respondent insolvent, the appellant before this Court had

himself presented a similar petition on the 29th of July, 1935, in the Court of the Subordinate Judge of Bezwada asking for a similar relief. Since

the order of adjudication was made by the District Court of Kistna on the petitioning creditor''s application prior to the disposal of the present

appellant''s application filed in Bezwada, that petition does not seem to have been pressed. The learned Advocate for the respondents argues with

considerable force that it does not lie in the mouth of the present appellant now to say that at the time the second respondent was adjudicated

insolvent, the adjudication ought not to have been made.

The learned Advocate for the appellant argues that Section 9 of the Provincial Insolvency Act prescribes the conditions that should be fulfilled to

entitle a creditor to present an insolvency petition against a debtor and he points out that the main condition is the existence of a debt due to that

creditor to the extent of at least Rs. 500. Therefore, if on a petition presented by a creditor, an adjudication is made, if it is possible to establish

subsequently, that on the date of that petition, there was no genuine debt due to that creditor, then that is a fit case in which the adjudication should

be set aside u/s 35 on the ground that the debtor ought not to have been adjudged insolvent. This contention I am not able to accept as well-

founded. There is no doubt that but for the petition presented by the creditor, the adjudication would not have taken place but once an

adjudication takes, place, all the other creditors of the debtor become interested in the matter and unless the appellant here is able to show that the

debtor did not owe any other debts or that the debtor was not really insolvent at the time the order of adjudication was made by the lower Court,

it is not open to him to contend that it is a case in which the order of adjudication ought not to have been made.

The learned Advocate for the respondents cites the decision reported in Ex parte French: In re Trim 52 L.J. Ch. 48, where the facts were

similar to the facts in the present case. Under the English law, it is only if a debt of �50 is due by the debtor that the creditor to whom such a

debt is due can validly file a petition for adjudicating the debtor insolvent. In that case, after the adjudication, the debtor came forward and satisfied

the Court that made the order of adjudication that the debt due to the petitioning creditor was below �50. Thereupon, the County Court Judge

annulled the order of adjudication but the Court of Appeal reversed this decision. The following sentences that occur in the judgment of Bacon,

C.J., are relied on by the learned Advocate for the respondent:

Proceedings in bankruptcy are for the benefit not only of the petitioning creditor, but of all the creditors It is no reason, even if the petitioning

creditor''s debt is not established, that the other creditors should be deprived of their rights.

This decision seems to me to be strongly against the appellant in the present appeal. The learned Advocate for the appellant cites the following

decisions in support of his contentions. Koya Mohideen v. Hashim Khan AIR 1935 Rang. 276, In re Whelan: Ex parte Sadler 48 L.J. p. 43,

V.R.K.M. Kumarappa Chettiar Vs. K.M.V.R. Chidambaram Chettiar and Another, , Alamelumangathayarammal Vs. T.S. Balusami Chetti, and

Karuthan Chettiar v. Raman Chetty (1926) 24 L.W. 486. In the case reported in Koya Mohideen v. Hashim Khan (1926) 24 L.W. 486 during

the temporary absence of the debtor, a person who said he was a creditor filed a petition and got the debtor adjudicated insolvent. The debtor on

coming to know of this order of adjudication applied for its annulment and he succeeded in showing that it was not competent to the creditor to

obtain the order of adjudication. What is significant in the report of this case is that there is nothing in it to show that there were other creditors who

were interested in the proceedings. In the case in In re Whelan: Ex parte Sadler , it was shown that there was no debt to the extent of �50 due

by the debtor to the creditor. In V.R.K.M. Kumarappa Chettiar Vs. K.M.V.R. Chidambaram Chettiar and Another, , the petition that was filed

for adjudication showed on its face that there was no act of insolvency committed by the debtor within three months before its date. In the case in

Alamelumangathayarammal Vs. T.S. Balusami Chetti, , it was held that the debtor was in a position to discharge his debts in full and therefore it

was an abuse of the process of Court to apply for and obtain an order of adjudication. In the case in Karuthan Chettiar v. Raman Chetty (1926)

24 L.W. 486, it was found that there was no allegation of any act of insolvency when the petition was filed for adjudication. These cases cannot, in

the circumstances mentioned above, be regarded as authorities for the proposition that the learned advocate for the appellant wants the Court to

accept, namely, that if the appellant merely proves that there was no binding debt due to the petitioning creditor then the Court is bound u/s 35 to

set aside the order of adjudication on the ground that the order ought not to have been made. In my opinion, the allegations contained in the

affidavit filed by the appellant in the Court below in support of his contention that the adjudication should be annulled were not sufficient for such

annulment. In these circumstances, the conclusion arrived at by the lower Court is correct although the reasons given in its order cannot be

supported.

The appeal therefore fails and must be dismissed with costs (one set).