K. Krishnan vs S. Ayyathurai and Others

The petitioner-debtor in I. P. 1 of 1973 on the file of the District Munsif, Thirumangalam, is the revision petitioner. The respondents herein were

arrayed as creditors in the said insolvency petition. The petitioner filed the petition under Ss. 10 and 13(1) of the Provincial Insolvency Act

(hereinafter referred to as the Act) for adjudging himself as an insolvent. The material averments made in the petition are that the petitioner is a

resident of Thirumangalam; that he suffered heavy loss in the choir business which he carried on with his brothers; that he has got a one-fourth

share in the property shown in Sch. B to the petition; that he is earning only Rs. 150 per month; that he is unable to pay his debts and that he

should be adjudged an insolvent in the said circumstances. Respondents 1 and 3 contested the petition mainly on two grounds (I) that the District

Munsif, Thirumangalam, has no jurisdiction to entertain the insolvency petition because the petitioner is residing at Nagercoil and the property

described in the petition is also situate in Nagercoil; (ii) that the petitioner cannot be said to be a person unable to pay his debts. The District

Munsif, Thirumangalam, dismissed the petition and aggrieved by the same, the petitioner preferred C. M. A. 42 of 1974, which came to be heard

and disposed of by the Additional District Judge, Madurai. The appellate Court concurred with the findings of the first court and dismissed the

appeal. The present revision is directed against the orders of the appellate court.

The question that came up for consideration in this revision and as urged by the learned counsel for the petitioner, would be (1) whether the

courts below have conformed to the principles laid down under the Act for consideration of a debtor''s petition for self adjudication on the ground

that he is unable to pay his debts; and (2) whether the debtors has not satisfied the provisions of S. 11 of the Act with reference to the presentation

of the petition before the District Munsif, Thirumangalam. The law with regard to the consideration of a petition by a debtor under S. 10(1) of the

Act is well settled by decisions of this court. The proviso to S. 24(1)(a) of the Act reads as follows-

Provided that, where the debtor is the petitioner, he shall, for the purpose of proving his inability to pay his debts, be required to furnish only such

proof as to satisfy the Court that there are prima facie grounds for believing the same and the court, if and when so satisfied shall not be bound to

hear any further evidence thereon.

Ramaprasada Rao J. defined the scope of enquiry under S. 24 of the Act, in Lingasami Goundar Vs. S.K. Subramanian and Others, in the

following terms :-

when the statute uses the word prima facie grounds for believing the statement of the debtor of this inability to pay his debts, the degree of the

burden of proof that is called for by the statute is not to be equated to the degree of proof as is always necessary in an ordinary civil litigation........

In my view, such a detailed examination is not warranted. If a person approaches the court by inflicting on himself the ignominy of his inability to

pay his debts and in consequence seeks for an order adjudicating him insolvent, then, unless there is strong evidence to disprove such a voluntary

confession made by him, the court need not at that state employ itself in a deep enquiry regarding the opulence of the debtor and his ability to pay

his debts. A summary enquiry is indicated; prima facie proof is called for and if that is undertaken and if a decision is rendered by the appropriate

court, then it cannot be said that such an order is without jurisdiction or suffers from any material irregularity. The High Court also, under S. 75(1)

of the act, is only expected to see whether the order of the appellate Court is in accordance with law or not. The lower court says that prima facie

it is satisfied that the respondent is unable to pay his debts. This is a finding based on application of material considered by the court below. The

order otherwise cannot be said to be not in accordance with law.

This dictum has been adopted by me while dealing with a similar case in C. R.P. No. 107 1975. Keeping this principle in mind, if one scrutinises

for the orders of the courts below, it is patent that they have violated the said principle literally and practically. The District Munsif, Thirumangalam,

observes as follows-

In cross-examination, the petitioner has stated that he does not know the material particulars of his own property. He even goes tot he extent of

saying that he does not know the boundaries and measurements of the property of his own. The 3rd respondent did not enter into the box and it is

not clear as to whether the 3rd respondent is the close friend of the petitioner. Admittedly, the property mentioned in the petition is situate in

Nagercoil municipal town. There is no evidence to show that the other pronotes were executed for the purpose of discharging family debts. The

1st respondent would depose that the petition mentioned property''s value is more than Rs. 10,000. Respondent-2 remained ex parte. The 3rd

respondent had not entered the box. Under these circumstances, I see no reason to allow this petition. I hold that the petitioner is liable to pay the

debts of the 1st respondent.

Equally so, the appellate Court has launched upon a deep enquiry as to the bona fides of the claims of the debtor. This is evident from the

discussion of the case by the appellate court in para 4 of its judgment, the relevant portion of which is extracted hereunder-

But even according to him he owns a property described in B schedule lying within the Nagercoil municipal limits. He has valued it at Rs. 1,000.

3rd respondent also claims to have obtained a decree against the appellant in O. S. No. 715/71 on the file of the District Munsif Court, Nagercoil.

It is stated that even the B schedule property is worth more than Rs. 10,000. Significantly the counters filed by respondents 1 and 3 did not

provoke appellant to file any rejoinder to refute their claims. On the other hand, appellant alone has been examined as P. W. 1 says that he

incurred the debts in the course of the business. No details of his business are mentioned. It is not as though he was having an independent

business. The business was that of his brother also. His brother has not been impleaded as a party to the proceedings. Not a scrap of paper has

been placed to show that the business has ended in loss. The contention of the 3rd respondent is that even now in the business appellant gets more

than Rs. 1,000 per month. Decrees had been obtained by respondents 1 and 3 only individually against the appellant. There is no question of any

joint decree against the appellant''s brother. The petitioner says that he is now getting Rs. 150 per month. As P. W. 1 he says that he is working in

a firm at Rs. 150 per month. That firm has not been summoned. Apart from P. W. 1, none else has been examined to show that he is employed in

that firm or that he is paid Rs. 150 per month alone. Taking all these materials it is difficult for me to come tot he conclusion that even in a prima

facie manner the appellant is unable to pay his debts.

This approach has been discountenanced by this court, as stated above. Hence I find that the petitioner has placed materials before the courts

below which do prima facie satisfy the court that he is unable to pay his debts and the orders of the courts below are vitiated in the sense that they

have tested the bona fides of the petitioner from more than one angle and they have indulged in a deep enquiry, which is unwarranted for the

purpose of finding out prima facie about the inability of the debtor to pay his debts.

Coming to the next point regarding jurisdiction, I find that the District Munsif, Thirumangalam, had not mooted out a point for consideration on

the question of jurisdiction. On the other hand, the appellate Court did formulate the point with regard to jurisdiction, but on an assumption that

before the petition could be presented in the court of the District Munsif, Thirumangalam, the petitioner must be a permanent resident within the

jurisdiction of that Court, or must permanently carry on business, or permanently work for gain in such local area. From a reading of S. 11 of the

Act, I do not find any warrant for substituting or adding the word ''permanently'' for, or to the expressions specifically used in that section. Section

11 of the Act reads as follows-

Even insolvency petition shall be presented to a court having jurisdiction under this Act in any local area in which the debtor ordinarily resides or

carries on business, or personally works for gain, or if he has been arrested or imprisoned, where he is in custody; Provided that no objection as to

the place of presentment shall be allowed by any court in the exercise of appellate or revisional jurisdiction unless such objection was taken in the

court by which the petition was heard at the earliest possible opportunity and unless there has been a consequent failure of justice.

There is no necessity to insist that to come within the purview of S. 11 the debtor must permanently reside or permanently carry on business, or

permanently work for gain in the concerned local area. Such a view runs contrary to the decision of a Bench of this court in Mohamed Zackeria,

firm Vs. V. Srinivas and Co. and Another, dealings with a case arising under the Presidency Towns Insolvency Act, containing similar provisions.

In Lakshminarayana Aiyar Vs. C.R. Subramania Aiyar and Another, it was laid down as follows-

It is enough if the debtor has remained within the limits of the District in which he presented the petition, though he may not have any permanent or

continuous residence within it and may have occasionally gone outside the district and returned to it.

Similar views have been taken in Kishan v. Raj Bahadur, AIR 1914 Oudh 313 and in Henri Thomas Victor v. Mohammad Gul, AIR 1917 Oudh

176 while considering similar provisions under the Provincial Insolvency Act of 1907. In this case, it is evident from Exs. A-1 to A-3 that at the

relevant point of time, the petitioner remained and carried on business in choir mats within the jurisdiction of the District Munsif, Thirumangalam.

That would satisfy the requirements and the petition filed by him for self adjudication before the District Munsif, Thirumangalam is competent.

In the said circumstances, this revision is allowed, but there will be not order as to costs.

Petition allowed.