Perianambi Srirangachariar vs Narasimha Aiyar and Others

Devadoss, J.—This is an application to revise the order of the District Judge of Madura dismissing the appeal of the petitioner against the

order of the Subordinate Judge declining to adjudicate him an insolvent. The learned Judge has held that it has not been shown that the petitioner

was unable to pay his debts. When a debtor files an application to be adjudicated an insolvent u/s 24 of the Provincial Insolvency Act, he has to

show that he is unable to pay his debts. But the proof that is required is only a prima facie proof, for proviso to Section 24 (a) provides 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 arc prima facie grounds for believing the same.

The mere fact that the debtor has large properties is no ground for holding that he is able to pay his debts. A man may have property but he may

be unable to raise money to pay his debts and therefore the Court is not entitled to come to the conclusion that the man is unable to pay his debts

because he has got properties the value of which is more than that of his debts he has to pay. This point was decided so long ago as 23rd

September, 1925, in a case reported in Narayanappa v. Bheemappa (1925) 24 L.W. 219 In holding an enquiry u/s 24 a Court is not entitled to

consider whether the debtor has committed acts which would make him liable under the penal provisions of the Insolvency Act. In this case two

issues were raised, issues Nos. 3 and 4, by the Subordinate Judge, which are as follows:

(3) Is the petition bad on account of the suppression of prior insolvency proceedings?

(4) Have the petitioners suppressed any of their assets?

These are not germane to the enquiry which a Court ought to hold u/s 24. The fact that the petitioner has not brought to the notice of the Court

all his property is no ground for holding that he is able to pay his debts. I think the consideration of these two issues has materially prejudiced the

Subordinate Judge in the disposal of the case for in paragraph 10 he remarks:

In this case the debtors having suppressed a major portion of the properties, it is impossible for me to find that they are unable to pay their debts.

The learned District Judge also refers to this fact in his judgment and observes:

In the present case the learned Subordinate Judge has given excellent reasons for holding that the appellants omitted from their petition many

properties which really belonged to them.

I think this fact has materially affected the judgment of both the Lower Courts and that being so, they are vitiated by a consideration of

circumstances which ought not to be considered when a debtor''s petition is being heard u/s 24 of the Insolvency Act. Any act which offends

against the provisions of the Insolvency Law should be considered when the debtor comes up for his discharge and if he is guilty of any offence

mentioned in the Act he should be proceeded against according to law. When a debtor comes forward and says that he is unable to pay his debts,

the Court has to satisfy itself whether he is unable to pay them and if he has assets or if his property cannot be converted into money, the statement

of the debtor that he is unable to pay his debts must be accepted as true unless the Court has reasons to think that all his debts are fictitious debts

and that he is making the application with an ulterior motive.

If the Court finds that the debtor has a strong motive to allege falsely that he is unable to pay his debts, the Court may hold that the proof is not

sufficient; in other cases, the Court will be well advised in accepting the statement of the debtor. 1 set aside the judgment of the Lower Courts and

direct the Subordinate Judge to restore the application to file and dispose of it in the light of the remarks made herein.

Costs of this application will be provided for in the order of the Sub-Court.