K. Jewan Jyoti vs Fateh Chand Brij Lal

R.L. Anand, J.—Ms. K. Jewawn Jyoti has filed the present appeal and it has been directed against the judgment dated 5.1.1988 passed by the Additional District Judge, Ferozepur, who dismissed the appeal of M/s Ditto Mall Barkat Ram, K. Jewan Jyoti and Mast Ram, Advocate, u/s 75 of the Provincial Insolvency Act, 1929 (hereinafter called ''the Act''), by affirming the order dated 15.6.1985 passed by the Insolvency Judge, Ferozpur.

The brief facts of the case are that M/s Ditto Mall Barkat Ram and others filed a petition under Sections 6, 7, 9 and 13(2) of the Act against M/s Fetah Chand Brij Lal and its partners, respondents 1 to 5, on the allegations that the respondent-firm took loan of Rs. 5,500/- from the petitioner No. 1. Respondent No. 1 also took a loan of Rs. 5,500/-from M/s Barkat Ram and Company and other creditors. The names of 10 others creditors have also been mentioned in para-2 of the petition. Further it is pleaded by the petitioners that during the past few months before the presentation of the petition which was instituted somewhere in the year 1984, the respondents had started evading the payments not only of the principal amounts but even of the interest due on those amounts and during the past six months, all the investment brokers pleaded inability even to procure cheques for interest due on the amount. It was also alleged that with intent to defeat and delay their creditors, the respondents have closed their business by handing over the Sheller and Saila Plant, etc. to M/s Jagdish Lai Rattan Lal of Ferozepur City and they have also left their dwelling house and in the first week of January, 1981, Krishan Lal, partner of respondent No. 1, told the petitioners that the respondents have suspended all the payments and were contacting some of their Commission Agents for taking over their Sheller and Saila Plant etc. According to the information received and believed to be true, the respondents owned properties i.e. Sheller, Expeller, Flour Mill etc. along with land and truck. With the above allegations, the petitioners prayed that the respondents be summoned and they be directed to disclose their assets and liabilities. They be adjudged insolvent and their assets may be ordered to be realised and distributed among the creditors.

The petition was contested by the respondents who stated that no act of insolvency was committed by them; that the respondent-firm never made transfer of its property or any property to defeat or delay the creditor; none of the partners had at any time secluded themselves so as to deprive the creditors of the means of communication and even no property of the respondents was sold in execution of the decree for payment of money. It was further pleaded by the respondents they could not be adjudged as insolvent as they had never given notice to any of the creditors that they had suspended or about to suspend the payment of their debts. None of the partners of the firm was ever imprisoned in execution of any decree of the Court for payment of the money. The respondents are owners of the property more than 15 lacs whereas the debt was of less amount which could be or would be paid. They only arranged to hand over the Saila Plant for Rs. 50,000/- which amount would be paid to the creditors. They were running the rice plant as usual in the season. They had been always ready to pay the debt amount but due to rainfall on the paddy and due to the calamity, they could not sell the rice. It was alleged that they had not closed their business. Saila Plant was handed over on lease for a period of one year and this was no act of insolvency. The respondents are residing in the same house. Respondent Krishan Lal never met the petitioners as alleged. The respondents also took the plea that the money of the petitioners was settled to be paid after the receipt of the amount from the F.C.I. With the above defence, the respondents prayed for the dismissal of the petition.

From the above pleadings of the parties, the following issues were framed:-

"1. Whether the respondents have committed act of insolvency? OPA.

Relief."

The present appellant was added as a petitioner during the pendency of the appeal before the appellate court vide order dated 22.7.1987. Similarly, Mast Ram, non-appellant, filed an application to be impleaded as a party in the capacity of a creditor and he was also allowed to be added as an appellant vide order of the same date.

At the first instance, the trial Court held that the respondents have not committed the acts of insolvency and vide order dated 15.6.1985, the petition was dismissed.

Aggrieved by the said order, an appeal was filed, which was also dismissed for the reasons given in para-7 of the impugned judgment, and the (same) reads as follows:-

"After careful consideration of the respective contentions of the parties and going through the record, I find that there is nothing worthwhile to show that the respondents had committed act of insolvency and are liable to be declared insolvent. As regards this contention that the petitioner/appellants were not granted sufficient time to produce evidence to prove their case, it may be noted that the issues were framed on 3.3.1982 and on 6.6.1985 Shri Masti Ram Advocate for the petitioners made a statement that he had to produce no evidence in the petition for insolvency. Thus, it is clear that the petitioners were afforded adequate time to produce evidence but the petitioners did not produce any evidence. As such it cannot be said that during the trial the petitioners were not afforded sufficient opportunity to produce evidence. No evidence has been led by the petitioners to prove that the respondents have committed act of insolvency. What has been mentioned in the grounds of appeal and application dated 20.2.1985 and reply thereto dated 16.3.1985, it does not prove that the respondents have committed acts of insolvency. The fact that afterwards the respondents compromised with the petitioners and paid them the settled amount shows that the respondents have been ready to pay back the debts and even paid some of the debts. The mere fact that due to natural calamities the respondents could not sell the paddy at its adequate price and it resulted in delaying the payments, is no grounds to conclude that respondents had committed acts of insolvency. If Rice Sheller was stopped due to off season, it did not mean that the respondents closed their business. Likewise giving on lease rice sheller plant by the respondents would not be an act of insolvency as according to the respondents, it was done so to pay the debts. The delay in payment, of debts appears to be due to the fact the F.C.I, could not make the payment to the respondents in time. If some of the creditors settled their dues with the respondents at a lesser amount is of no consequence as it was so done by mutual consent and in no way amounts to be an act of insolvency. It is claimed by the respondent that they owned properties worth lacs and this fact is not refuted by the petitioners/ creditors but has been admitted by the petitioners in para No. 56 of the application where they stated that the respondents owned sheller, expeller, flour mill etc. with land and building thereon, sela plant, brick-kiln alongwith land adjacent to it and truck etc. According to the respondents this property is worth more than 15 lacs. It is nowhere alleged or proved that loans advanced by creditors to the respondents are more than the value of the property/assets of the respondents. In these circumstances, it is concluded that the respondents have not committed any act of insolvency and there is no ground for declaring them as insolvent."

I have gone though the orders of the Courts below.

Section 6 of the Act lays down that a debtor commits an act of insolvency if, in India or elsewhere, he makes a transfer of all or substantially all his property to a third person for the benefit of his creditors generally, if, in India or elsewhere, he makes a transfer of his property or of any part thereof with the intent to defeat or delay his creditors; if, in India or elsewhere, he makes a transfer of his property or of any part thereof, which would, under this or any other enactment for the time being in force, be void as a fraudulent preference, if he was adjudged an insolvent; if, with intent to defeat or delay his creditors, he departs from his dwelling house or usual place of business or otherwise absents himself; of it, he secludes himself so as to deprive his creditors of the means of communications with him; or if, any of his property has been sold in execution of the decree of any Court for the payment of money; or if, he gives a notice to any of his creditors that he has suspended, or about to suspend payment of debts; or if, he is imprisoned in execution of the decree of any Court for the payment of money.

The onus is upon the petitioner to show that the respondents had committed such acts of insolvency so as to adjudge them as insolvent. Merely that a person has fallen in debt is no ground to adjudge him as insolvent. Profit and losses are the incidents of business. In this case, the appellant has not led any evidence whatsoever to convince the Courts below that the respondents had committed such acts within the purview of Section 6 of the Act, so as to adjudge them as insolvent. If the Saila Plant has been given on lease for a period of one year, it cannot be said nor any inference can be drawn that the respondent had given the lease of the Saila Plant in order to defeat or delay and with the intention to devour the amount of the creditors. Rather, the proved facts are that during the pendency of the petition, the respondents had cleared the debt of M/s Ditto Mall Markat Ram, the first which originally filed the petition. This shows the capacity on the part of the respondents to pay the debt and their intention. The stand of the respondents throughout was that the moment they would received the lease money, they will discharge their liabilities. They have given a reasons about the suffering of the losses. In the view of this court, the petition was filed by the present appellant as a pressurising tactic. Instead of filing a regular suit for the recovery of the loan amount, a coercive method has been adopted by the appellant with the intention to put to disrespect the respondent-firm. I fully agree with the reasons given in para-7 of the judgment of the appellate Court narrated above and do not see any merit in this appeal.

No merit. Dismissed.