Karmagam vs Jayaseelam Chettiar and Others

T. Ramaprasada Rao, J.—The Court below ought not to have dismissed the petitioner''s application for adjudication as an insolvent u/s

10(1) of the Provincial Insolvency Act, 1920. The petitioner''s case in his petition was that he has incurred loans in cultivation and agricultural

operations; and incurred debts to the tune of Rs. 7,200 which is inclusive of a decree debt: admittedly obtained Against him by one of his creditors

who is the first respondent in the application filed in the lower Court. It is not in dispute that the first respondent obtained a decree in O.S. No. 418

of 1971 on the file of the District Munsifs Court, Nagapattinam and that he has levied execution against him and obtained also an order of arrest in

execution of the decree. Consequent upon such harassment by his creditors and his inability to pay the debts disclosed by him in the schedule to

the petition, the petitioner came to Court with an application for voluntary adjudication, of himself as an insolvent. Excepting the first respondent,

other creditors did not contest. The first respondent''s case was that the debts disclosed by the petitioner other than the decree debt owing by him

to the first respondent, were not true and. genuine. According to the first respondent the petitioner is a rich mirasudar and that he owns amongst

other things, a flour mill at Nagapattinam. He would contend that there has been an obvious suppression of such assets by the petitioner and that

therefore the petition has. to be dismissed. The learned Sub-Judge found that the petitioner owed the decree debt. But he would accept the first

respondent''s case that the petitioner owns a running flour mill besides a building and that as the petitioner is running the same, he should be

presumed to be the owner thereof. The case of the petitioner in the lower Courts and"" before me is that the mill does not belong to him and it is not

one of his assets. Nevertheless the Courts below found that the petition was not a bona fide one and dismissed the application for adjudication. It

is as against this the present Civil Revision Petition has been filed. The application for adjudication made by the debtor and initiated on his own

volition is one which has to be scrutinised and disposed of in accordance with the provisions of the Provincial Insolvency Act as this is arising under

that Act 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. In the instant case the firts respondent has not Only obtained a decree, but in execution he is seeking to arrest

the petitioner. Obviously in order to avert an arrest and also for the reason that he was unable to pay his debts, the petitioner has filed the present

application u/s 12 of the provincial Insolvency Act. The petition contains the contents which an insolvency petition should contain and the act of

insolvency thereto is that he is unable to pay his debts. The first respondent, as creditor, opposes this on the ground that there hap not been a true

and full disclosure of the assets of the petitioner. In particular his case is that the Sour mill in Nagapattinam is an asset belonging to the petitioner

and he having not disclosed the same, should be deemed to have presented this application without any bona fides and that therefore the

application merits dismissal. But the Act itself prescribes the procedure to be followed: on the date when such an application is set for hearing. It

says under proviso to Section 24(r)(a) of the Provincial Insolvency Act 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 arid when so satisfied, shall not be bound to hear any further evidence thereon. The legal interdict created by the language in the

proviso as above in the matter of creation of a bar to hear any further evidence in Case there are prima facie grounds to believe that the debtor is

unable to pay his debts, Has some significance. As in the instant case, if a creditor puts forward a story that the petitioner-debtor is possessed of

assets, it proves that at that stage, it would not be necessary for the Court to hear any further evidence thereon,, if it is satisfied about the inability

of the debtor to pay his debts. No further proof of inability to pay one''s debts is his necessary then his own solemn affirmation. This might appear

to be a general observation. In the particular case, there is admittedly a decree as against the petitioner which is more than Rs. 500. The petitioner

says that he is unable to pay his debts. Prima facie therefore, there are grounds to believe the same in the sense that the petitioner is seeking for a

voluntary adjudication and for the self-imposition of a badge of insolvency on him on the ground that he is unable to pay such debts at that stage; it

appears to me that the Court is not bound to enter into any further investigation and much less hear any further evidence on the opulence or the

ability of the petitioner to pay his debts. What the first respondent is attempting to do in this case is to disprove the allegation that the petitioner is

unable to pray his debts by stating that the petitioner is possessed of assets to wit, flour mill in Nagapattinam. Apart from the facts that the

petitioner is disclaiming such an asset and is asserting, that it is not his, it would be beyond the scope of the inquiry as contemplated in the proviso

as above for the Court to embark upon such an investigation to find ultimately whether the petitioner is able or unable to pay his debts. As already

stated, this statement of the debtor that I he was not able to pay the decree debt. which is not in dispute, is sufficient prime facie proof that he

wants to be adjudicated'', on that ground. The lower Court misdirected itself in causing a superficial inquiry to be held about the ownership of the

Mill and ultimately to come to the conclusion that the petition is not a bona: fide one. The provisions of the Provincial Insolvency Act, 1920 did not

enable; the Court to dismiss such application on such a priori considerations. In, Seshachala Chetty and Others Vs. Para Chinnasami and Others, it

is said that if any such situation arises, the stage at which the Court can visit the petitioner with any alleged consequences of any misconduct of the

debtor,., is when the debtor applies for discharge and not on the initial proceedings, when an application under the Act is made by the debtor

himself to be declared as an insolvent. If such an inquiry is contemplated, the Act should have specifically provided for it. It has not. The reason

appears to be obvious. The Official Receiver who would come into the picture after adjudication and who represents the body of creditors, would

necessarily investigate into the question for the benefit of the creditors and if any asset has been screened by the debtor he would bring the same

into the pool for the purpose of division amongst the body of creditors. For this and for the reasons already stated, the lower Courts failed to

exercise jurisdiction in law and had committed an apparent error in having dismissed the application for voluntary adjudication. The civil revision

petition is allowed. No order as to costs.