P.K. Venkateswaran vs V.R. Shanmugam

This a petition by three creditors to adjudge the respondent as insolvent under Ss. 9(d)(ii) and (iii), 10, 11, 12 and 13 of the Presidency Towns

Insolvency Act, hereinafter referred to as the Act.

According to the petitioners, the respondent borrowed from the 1st petitioner a sum of Rs. 15,000/- on 11-9-1980 bearing interest at 24% per

annum; a sum of Rs. 15,000/- on 6-2-1982 bearing interest at 30% per annum, a sum of Rs. 5,000/- on 9-11-1983, bearing interest at 30% per

annum and another sum of Rs. 7,000/- on 30-10-1983, bearing interest at 30% per annum; in all, the respondent has borrowed a sum of Rs.

42,000/- from the l st petitioner. He has borrowed from the 2nd petitioner a sum of Rs. 1,500/- on 22-12-1982 with interest at 36% per annum; a

sum of Rs. 65,000/- on 1-10-1983 with interest at 36% per annum; a sum of Rs. 5,000/- on 19-10-1983, with interest at 42% per annum; a sum

of Rs. 21,000/- on 9-1-1984, with interest at 12% per annum; a sum of Rs. 70,000/- on 25-5-1984, with interest at 36% per annum; and a sum

of Rs. 20,000/- on 22-8-1984, with interest at 36% per annum; in all, he has borrowed from the 2nd petitioner a sum of Rs. 1,82,500/-. The

respondent has borrowed from the 3rd petitioner a sum of Rs. 4,000/- on 6-6-1983, with interest at 36% per annum and another sum of Rs.

4,000/- on 10-1-1984 with interest at 12% per annum.

For some of the amounts borrowed from petitioners 1 and 2, the respondent has furnished collateral security of Door No. 5, Ayya Pillai Street

and 70, C.N. K. Street, both situated in Triplicane, Madras-5. The rest of the amounts due to petitioners 1 and 2, and the entire amount due to the

3rd petitioner are not covered by security. All the loans have been advanced by the petitioners to the respondent through one A. V. Subbiah,

Advocate. The respondent paid interest up to 30-9-1983 on two promissory notes executed by him, each for Rs. 15,000/- dated 11-9-1980 and

6-2-1982 respectively, on 5-10-1983, by duly making endorsement on the promissory notes. Thereafter, he suspended payment of interest. The

respondent has not paid interest in respect of petitioners 2 and 3 and also in respect of the 1 st petitioner on the rest of the promissory notes. Thus,

on the date of the filing of the petition, a sum of Rupees Two Lakhs and odd is due to the petitioner''s towards principal as detailed in the Annexure

filed along with the petition.

It is further alleged in the petition that the respondent has committed an act of insolvency within the meaning of S. 9(d)(ii) and (iii) of the Act. As

the petitioners have not pressed the adjudication of the respondent with regard to the act of insolvency alleged to have been committed by the

respondent under Ss. 9(d) and 9(g) of the Act but pressed only an act of insolvency under S. 9(d)(ii) and (iii) of the Act, it is sufficient to confine to

the averments in the petition which constitute an act of insolvency under S. 9(d)(ii) and (iii) of the Act.

The petitioners further contended in the petition that the respondent was not available in his house for six months prior to the filing of the petition.

The petitioners called on the respondent several times to demand payments and on all such occasions, his wife has been saying that the respondent

is out of station. Ultimately, the petitioners caused a lawyer notice to be issued to the respondent to inform him that insolvency proceedings have

been taken against him. The same has been returned with the postal endorsement that the respondent is not found for delivery on various dates. A

copy of the lawyer notice was sent by the 1st petitioner subsequently, which was also returned with a similar endorsement. Lastly, the 2nd

petitioner went to the house of the respondent on 5-12-1985 to demand payment in respect of the earliest promissory note dated 22-12-1982 for

Rs.1,500/- as it expired on 21-12-1985. The respondent''s wife informed the 2nd petitioner that the respondent has gone out of station but the

2nd petitioner was able to hear the voice of the respondent from inside the house. All attempts and persuasion of the 2nd petitioner to meet the

respondent proved futile. Therefore, it is obvious that the respondent has either departed from his dwelling house or has absented himself so as to

deprive his creditors of the means of communication and thereby he has committed an act of insolvency under S. 9(d)(ii) and (iii) of the Act. Since

petitioners 1 and 2 have security only for certain loans and as the other items of loans remain unsecured and as the respondent has committed

several acts of insolvency, the 1st petitioner is willing to relinquish his security in respect of the house of the respondent viz. Door No. 5, Ayya Pillai

Street, Triplicane, Madras-5 for the benefit of the creditors in the event of the respondent being adjudged insolvent. The 2nd petitioner is also

willing to relinquish his security in respect of Door No. 70, C.N.K. Street, Triplicane, Madras-5. The debt payable by the debtor/respondent is

more than Rs.500/- in a liquidated sum payable immediately and the act of insolvency has occurred within three months prior to the filing of the

petition. The petitioners therefore pray for adjudging the respondent as insolvent.

The respondent in his counter-admits the borrowings of Rs. 1,500/- on 22-12-1982, Rs. 65,000/- on 1-10-1983, and Rs. 5,000/- on 19-10-

1983 from the 2nd petitioner. The further borrowings alleged in the petition from the 2nd petitioner are denied. It is then stated that the first two

promissory notes in favour of the 1st petitioner have been discharged by the 2nd petitioner from the loan of Rs. 65,000/- advanced by him to the

respondent on 1-10-1983, and actually he received only Rs. 14,330/-. Out of the borrowings mentioned from the 3rd petitioner, the respondent

admits only a sum of Rs. 4,000/- on 6-6-1983. The respondent further stated that he has paid all the amounts due to all the three petitioners

including interest and a sum of Rs. 1,50,000/- was paid to the 2nd petitioner in June 1984. The respondent is working as travel agent in M/s.

Pawar Airways and in that connection he used to go to Bombay and Bangalore carrying parcels. It is not correct to say that the respondent was

not available in the dwelling house. The petition''s summon was served on the respondent only at his house at No. 70, C.N.K. Street, Triplicane,

Madras-5 and that house is his own house, where he is still living. The allegation that he had departed from his dwelling house is not true. He has

not committed any act of insolvency under S. 9(d)(ii) and (iii) of the Act.

Further according to the respondent''s counter, the 2nd petitioner wanted to buy the respondent''s property bearing Door No. 31; Venkatesa

Naicken Street, and entered into an agreement on 24-10-1983 and paid Rs. 50,000/-. Since he could not complete the sale, that property was

sold to one P. Mohamed Habeeba, wife of P. Sulaiman on 28-6-1984. The said Sulaiman paid a sum of Rs. 1,50,000/- to the 2nd petitioner

directly and got the agreement dated 24-10-1983 duly cancelled. This sum was paid in discharge of all the outstanding as on that date to all the

three petitioners and also returned the advance to the 2nd petitioner. Therefore, there is no amount due to the petitioners. The respondent has not

obtained any amount from any creditor after 31-12-1983. As the 2nd petitioner was aggrieved by the fact that the respondent has failed to sell his

house property to him, has filed this petition as a vendetta making use of the promissory notes signed by the respondent which have not been

returned after a sum of Rs. 1,50,000/ has been paid to him. The respondent has not committed any act of insolvency and there is no liability for the

respondent to pay any amount to any of the petitioners.

The petitioners filed a reply repudiating the allegations made in the counter and stating that the respondent is selling his properties one after the

other. Even after the filing of the petition, the respondent has sold one property and entered into an agreement to sell another property. The

petitioners deny the allegation that the summons in this petition was served at the residence of the respondent. The same was served only at Door

No. 62/14, First Floor, Manicka Mudaliar Mansion, Thayar Sahib Street, Madras-2 where the respondent''s office is situate.

As already stated, though this petition is filed alleging that the respondent has committed different acts of insolvency falling under various sections

of the Act, the petitioners have restricted their claim by making an endorsement on the petition to adjudge the respondent as insolvent only u/s 9(d)

(ii) and (iii) of the Act. Therefore, I have not referred to the averments with regard to the other acts of insolvency and the counter with regard to

those acts.

The first point to be decided is, whether the respondent has to be adjudged as insolvent. u/s 12 of the Act, in a petition to adjudge a debtor as

insolvent, the creditor has to prove that the debt owing by the debtor to the creditor exceeds Rs. 500/-, that the debt is a liquidated sum, that the

debtor has committed an act of insolvency on which the petition is grounded and that the game has occurred within three months before the

presentation of the petition. If the petitioning creditor is a secured creditor, he should relinquish his security for the benefit of the general creditors in

the event of the debtor being adjudged as insolvent. u/s 13(4) of the Act, notwithstanding the proof of the above mentioned facts by the creditor,

still the petition shall be dismissed if the debtor satisfies the Court that he is able to pay his debts or that he has not committed an act of insolvency

or that for other sufficient cause no order ought to be made.

According to the petition, all the amounts advanced under various promissory notes by the petitioners herein to the respondent are subsisting

except payment of some interest with regard to the first two promissory notes to the 1 st petitioner. The petitioners have filed all the promissory

notes. Exs. P-1 to P-4 are the four promissory notes executed in favour of the l st petitioner. Exs. P 17, to P-19, P-21 and P-22 are the

promissory notes executed in favour of the 2nd petitioner. Ex. P-20 is the promissory note executed in favour of the wife of the 2nd petitioner,

who is not a petitioning creditor in this petition. Exs. P-25 and P-26 are the promissory notes executed in favour of the 3rd petitioner. In order to

succeed in this petition, the creditors have to prove (i) that the debt outstanding is more than Rs. 500/- and (ii) the respondent has committed an

act of insolvency. To prove the debt, the creditors filed all the promissory note executed in their favour by the respondent.

With regard to the borrowing of Rs. 15,000/- each under Exs. P- 1 and P-2 from the 1 st petitioner, the respondent''s contention is, that the

said two loans have been cleared by the 2nd petitioner when the respondent executed a promissory note in favour of the 2nd petitioner on 1-10-

1983 under Ex. P-18 for Rs. 65,000/- and out of the said sum, the 2nd petitioner has cleared the loans due to the lst petitioner under Exs. P-1 and

P-2 and after adjusting the advance interest and other dues, the respondent was paid only Rs. 14,330/-. Admittedly, the respondent did not

receive back the promissory notes, Exs. P 1 and P-2. His explanation is, it is usual for the 2nd petitioner, who alone was arranging the loans as he

happened to be the Sammandhi of A. V. Subbiah, Advocate to the respondent to retain the discharged pronotes. Besides the fact that the

respondent has not got back the promissory notes, it is significant to note that the promissory note for Rs. 65,000/- was executed in favour of the

2nd petitioner on 1-10-1983 and the respondent has made endorsements on Exs. P-1and P-2 for payment of interest up to 30-9-1983 on 5-10-

1983. If the two loans had been discharged by the execution of Ex. P-18 promissory note in favour of the 2nd petitioner, there is absolutely no

reason for the respondent to make anendorsement on 5-10-1983 on Exs. P-1 and P-2. On the other hand, he ought to have got back the

promissory notes Exs. P- 1 and P-2 or he ought to have made an endorsement that the promissory notes Exs. P-1 and P-2 stood cancelled by

execution of Ex. P-18. There was also an earlier endorsement in Ex. P-1 on 31-3-1983 by A. V. Subbiah, Advocate on behalf of the respondent.

Though it is stated that this endorsement has been made subsequent to the endorsement on 5-10-1983 this does not appear to be believable. If

there was an endorsement only on 5-10-1983 by the respondent for the first time, he would not have left much space before his endorsement to

enable somebody else to make another endorsement on the top of his endorsement. Therefore, in the light of his endorsement in Ex. P-2, where no

space is left above the endorsement, the contention of the respondent that the endorsement by A. V. Subbiah was made subsequent to his

endorsement on 5-10-1983 in Ex. P-1 cannot be believed, When the 1 st petitioner has proauced all the promissory notes, it has to be taken that

the amounts due under those promissory notes are payable to the l st petitioner.

The respondent admits the execution of promissory notes in favour of the 1 st petitioner, three promissory notes in favour of the 2nd petitioner

and one promissory note in favour of the 3rd petitioner but his contention is that all the amounts due to the petitioners have been discharged when

he sold his house, 31, Venkatesa Naicken Street, Chepauk, Madras on 28-6-1984 to one F. Mohamed Habeeba, wife of P. Sulaiman. It is his

case that the 2nd petitioner had agreed to purchase that house and paid an advance of Rs. 50,000/- but subsequently, he could not purchase the

property as he had no money. So, the respondent sold the property to one F. Mohamed Habeeba, wife of Sulaiman under the original of Ex. P-15

for a consideration of Rs. 1,73,500/- and on that day itself the said P. Sulaiman directly paid Rs. 1,50,000/- to the 2nd petitioner in discharge of all

the loans due to petitioners 1 and 2 and 3 and also towards the return of advance to the 2nd petitioner, and obtained the title deeds with respect to

the said property, which were earlier given to the 2nd petitioner by the respondent, when he entered into an agreement to sell the property and

received an advances of Rs. 50,000/-. To prove the payment of Rs. 1,50,000/- to the 2nd petitioner, the respondent, besides examining himself as

R. W. 2, examined the said P. Sulaiman as R. W. 1. It is the case of the 2nd petitioner that he entered into an agreement with the respondent to

purchase the said house but subsequently at the intervention of A. V. Subbiah, since the respondent wanted to sell the house property for a higher

price to a third party to settle his dues, the 2nd petitioner cancelled the agreement and handed over the documents of title to the respondent after

the respondent had returned the advance. P. W. 2 in his evidence deposed that the respondent told him that to clear the debts, he wanted to sell

the property to a third party. According to P. W. 2, he did not receive any amount either from the respondent or from the said P. Sulaiman.

Therefore, it has to be seen whether the entire amount due to the petitioners have been discharged as contended by the respondent or no amount

has been paid as contended by the petitioners.

In the sale deed Ex. P-15, it is mentioned that the vendor is selling the property for the purpose of discharging the mortgage amount payable to

Jayaram, Chetty (2nd petitioner) and also to discharge his other sundry debts. But, there is no documentary evidence for actually paying Rs.

1,50,000/- to the 2nd petitioner. None of the promissory notes executed in favour of the three petitioners, towards the discharge of which and also

towards the discharge of advance to the 2nd petitioner, the said sum of Rs. 1,50,000/- is said to have been paid to the 2nd petitioner, has been got

back at the time of payment. R. W. 1, who is said to have directly paid that amount to the 2nd petitioner, did not choose to obtain any receipt for

the payment of such a huge sum of Rs. 1, 50,000/- to the 2nd petitioner. It is significant to note that R. W. 1 says that he paid the amount at the

residence of the 2nd petitioner in the presence of his Advocate Abdul Rahim, Manickam and the respondent. If the amount was paid in the

presence of his advocate, certainly the advocate would have insisted on a receipt being obtained from the 2nd petitioner to whom the amount was

paid. The explanation of the respondent, who was examined as R. W. 2 is, that it is the usual practice of the 2nd petitioner not to return the

promissory notes even though they are discharged, and further, as there was some dispute regarding interest payable, the discharged promissory

notes were not obtained back, pending settlement of the interest. This explanation for not getting back the discharged promissory notes, is certainly

not believable. In any event, if there is any dispute with regard to the payment of interest, there is no bar for obtaining a receipt for the actual

amount paid. If the amount has been really paid in the presence of the advocate for R. W. 1, who purchased the property, certainly that advocate

would have instructed R. W. 1 to pay the amount after obtaining a receipt. Therefore, the payment of Rs. 1,50,000/- to the 2nd petitioner is not

believable.

There is one other circumstance to disprove lump sum payment of Rs. 1,50,000/- by R. W. 1 on 28-6-1984, the date of execution of the sale

deed, to the 2nd petitioner. According to the recitals in the sale deed Ex. P. 15, the purchase amount has been paid in four instalments to the

vendor, viz., Rs. 50,000/- on 2-1-1984, Rs. 62,000/- on 16-4-1984, Rs. 36,500/- on 4-5-1984 and Rs. 25,000/- on the date of registration viz,

28-6-1984. In such circumstances, it is unbelievable that the purchaser Sulaiman collected the amounts paid by him to the respondent earlier paid

Rs. 1,50,000/- to the 2nd petitioner on the date of execution of the sale deed Ex. P- 15, to get back the title deeds relating to the purchase

property. Therefore, the story set up by the respondent that the entire amount due to the petitioners has been discharged by the respondent by

selling one of his house properties under Ex. P-15 is not believable. The petitioners have produced several promissory notes executed by the

respondent which have not been discharged by the respondent. Therefore, the respondent owes these sums to the petitioners. The principal

amount due under the promissory notes itself is more than rupees Two lakhs. The petitioners have only to prove that the respondent owes them

more than Rs. 500/-, which is required under the Act.

Next, we have to see whether the respondent has committed an act of insolvency u/s 9(d)(ii) and (iii) of the Act. u/s 9(d)(ii) of the Act, if a

debtor departs from his dwelling house or usual place of business or otherwise absents himself, he commits an act of insolvency. Likewise u/s (9)

(d)(iii), if a debtor secludes himself so as to deprive his creditors of the means of communicating with him, he commits an act of insolvency.

According to petitioners 1 and 2, who have been examined as P. Ws. 1 and 2, the respondent was not available in his dwelling house. According

to P. W. 1. from March, 1985 onwards he went to the house of the respondent several times to demand the amounts due but he was not available.

According to P. W. 2, finally some time in December 1985, he went to the house of the respondent and he was told that the respondent was out

of station but he heard the voice of the respondent from inside the house. Thereafter, he also sent a lawyer notice to the respondent and the same

was returned unserved. Ex. P- 10 is the returned cover. The 2nd petitioner also sent another registered letter enclosing a copy of the Lawyer

notice, which was also returned unserved. That returned cover is marked as Ex. P-11. In Ex. P-10, there is postal endorsement that the

respondent was riot found during his delivery time on 22, 24, 2-5, 26, 28, 29 and 30-10-1985. Similarly, in Ex. P-11, there is a postal

endorsement that the respondent was not found in his delivery time on 19, 21,22, 23, 25 and 26-11-1985.

The suit summon has been served on the respondent only in his business place at Thayer Sahib Street, Madras-2, which is clear from the

evidence of P. W. 5, the Court Amin. According to P. W. 5, he went to the house of the respondent to serve the summons but he was not

available. When he went again to the respondent''s house to serve the suit notice, he was not available in the house and the inmates told him that

the respondent had gone out and that they did not know where he had gone. According to P. W. 5, the 1st petitioner who accompanied him, told

him that the respondent was available in his office and accordingly he went to his office premises at Thayar Sahib Street and served the notice -on

him. P. W. 1 has admitted in his evidence that the respondent is carrying on business at Thayar Sahib Street and that he has started his business

1983. Though the notice sent to the respondent to his house address has been returned unserved, the petitioners have not chosen to send notice to

the respondent to his business premises. Moreover, it is not the case of the petitioners that the house of the respondent has been locked.

Admittedly, his wife has been in the house. No attempt has been made by the petitioners, before filing the petition, to contact the respondent in his

business premises. In this connection, the suggestion on behalf of the petitioners is, the respondent was having telephone in his house till the year

1984 and had removed the same in the year 1985 with a view to shut the communication of the creditors. For that purpose, the petitioners filed the

telephone directory for the years 1984 and 1985.But as pointed out by respondent''s counsel, the telephone number of the respondent 844346,

which was in his house in 1984, has been shifted in the year 1985 to his business premises. The same number finds a place in the name of

Shanmugham in the telephone directory for the year 1985 in the address of his business premises. Therefore, the contention of the petitioners that

the respondent has removed the telephone from his residence with the oblique purpose of preventing the creditors from contacting him has no

force. Actually, the same telephone number appears in the name of the respondent, but in a different address viz, in his business premises. When

such being the case, the petitioners ought to have contacted the respondent in his business premises. The evidence let in on the side of the

petitioners only shows that they tried to contact the respondent only in his residential house, but he was not available. As already pointed out, the

Amin served summons in the business premises of the respondent. That shows, the respondent was available certain times in his business premises.

As to the actual visit of the 2nd petitioner to the house of the respondent to demand money, he would as P.W. 2 state only about one visit

during December 1985 and he was not accompanied by any person even during that visit. This visit has been made just before the filing of the

petition. The suit notice sent to the residential address of the respondent, which was returned unserved also was just prior to the filing of the

Insolvency petition. Having decided to file the petition, the petitioners have chosen to send notice and also claim to have visited the house of the

respondent for which there is no corroboration. As has been held in The Audilakshmi Venkateswara Iron Traders v. Mayavanthi Jhamandas,

(1978) 2 MLJ 356, the petitioning creditors, who have chosen to visit the house of the debtor to prove that he was not available, should take the

elementary precaution of having their conduct and act corroborated by the testimony of independent witnesses and for this purpose, they should

also take the additional precaution of taking such witnesses along with them so that matters might not be doubted at a later stage, when it came up

for scrutiny in Courts of law. In such circumstances, particularly when the respondent was having a business premises, where the telephone has

been shifted from his residence and where he was available and to which address no notice has been sent nor any attempt has been made by the

petitioning creditors to contact him in that address, it cannot be safely held that the petitioning creditors have proved the act of insolvency against

the respondent u/s 9(d)(ii) and (iii) of the Act.

Even assuming that by virtue of the two notices having been returned unserved with the endorsement that the respondent was not found, on

that basis, even if it is concluded that an act of insolvency has been established u/s 9(d)(ii), still, in this case, since the respondent has contended

that he is able to pay the debts, it has to be seen whether he substantiates that contention. If he substantiates that contention, even if the debtor-

respondent committed an act of insolvency, still the petition is liable to be dismissed. According to the petition, the total debts due to the three

petitioners inclusive of the debt due to the wife of the 2nd petitioner comes to Rs. 2,32,500/-. Interest is claimed at heavy rates of 24% and 36%.

Accepting the interest as claimed, the total amount as per the petition comes to only about Rs. 3,77,000/. .According to the petitioners, though the

respondent owns a number of properties, he has been selling one after the other and therefore, it will be difficult for the creditors to recover the

amount from him. Excluding the properties sold by the respondent, including the one sold after the filing of the petition under Ex. P- 16, still he has

two houses. In the reply statement filed by the petitioners, they have valued Door No. 17, C.N.K. Street, Triplicane, Madras-5 at Rs. 4,00,000/-.

As such, the respondent, who is entitled to half share in that house, would be entitled to at least Rs. 2,00,000/- towards his share, though

according to the respondent, that house is worth about Rs. 7,00,000/- and that his share would be Rs. 3 1/2 Lakhs. Further, with respect to Door

No. 18, Murugappa Achari Street, Triplicane, Madras, which also belongs to the respondent, he had entered into an agreement to sell the rear

portion to one M. P. Damodaran (P.W. 4) for a sum of Rs. 3,10,000/- and had received an advance of Rs. 1,35,000/-. But the respondent did

not actually sell that property as seen from the evidence of P.W. 4. With respect to this house also, the respondent is still entitled to about rupees

two lakhs. Besides, he is carrying on business. Therefore, the respondent will being a position to satisfy the debts of the petitioners including

reasonable interest from out of the estate available with him.

The petitioners have not stated at there are other creditors whose debts also have to be satisfied by the respondent. The respondent has

categorically stated that he is not liable to pay any other debt. It is also seen, that the 2nd petitioner had entered into an agreement with the

respondent to purchase Door No. 31, Venkatesa Naicken Street, Chepauk, Madras-5, which was later sold under Ex. P-15, and also paid an

advance of Rs. 50,000/-. It is the admitted case of both parties that the transaction did not fructify. According to the 2nd petitioner, at the request

of A. V. Subbiah, he did not press his agreement and permitted the respondent to sell that house to a third party for a higher price and discharge

his debts. The respondent after selling that house property has not actually chosen to discharge the petitioners'' debts though he pretended to do so

as discussed earlier by making a recital in the sale deed Ex. P-15 and also through the evidence of R. W. 1. But still without verifying whether the

amount has been paid or not, the 2nd petitioner has chosen to advance a further sum of Rs. 20,000/- to the respondent subsequent to the sale

deed, under Ex. P-15. He had security for some of the debts but he has not chosen to proceed against the property given as security but filed the

insolvency petition.

In the decision reported in S.A. Ramalinga Mudaliar Vs. T.K. Ratna Mudaliar and Another, , a Bench of this Court had occasion to consider

the scope of ''other sufficient cause'' occurring in Section 13(4)(b) of the Act, by which the Insolvency Court has to dismiss the petition filed by the

creditors to adjudge the debtor as insolvent. In that decision, the Bench has held as follows: -

The words ''other sufficient cause'' in Section 13(4)(b) should be interpreted in the widest possible manner and not ejusdem generis in relation to

the earlier clauses in section. Adjudication of a debtor as insolvent changes his status, vests his entire property in the Official Assignee and limits his

capacity to do business or even acquire property. u/s 12 of the Presidency Towns Insolvency Act a debtor would be liable to be adjudicated

insolvent by an unsecured creditor having a claim for more than Rs. 500/- if the former had committed an act of insolvency within three months of

the petition. But, the right of such a creditor to adjudicate the debtor a bankrupt is not a weapon available to him to be used to serve any ulterior

purpose or to be used vindictively. If the object of the adjudication is not the result of a genuine desire to have the property of the debtor

administered in insolvency, but one solely with a view to disgrace him or to utilise the machinery of Court for other purposes, the petition cannot be

said to be a bona fide one. Section 13 gives power to the Court in those cases to dismiss it..............It cannot be said that adjudication of a debtor

as insolvent is one of the remedies open to a creditor and it will be for him to choose whether he is to take the thorny path of execution of the

decree or adopt a short cut of adjudicating the debtor an insolvent. An adjudication of a debtor as a bankrupt is not a method of collecting a debt,

though as a result of it, the creditor may get paid. Essentially, an adjudication brings about a change in the status of a debtor and enables the

Official Assignee or receiver in whom the property of the debtor gets vested to administer or sell it to pay off his creditors. It is only a particular

class of creditors that can file a petition for adjudication. And no absolute right is given to them to obtain an adjudication as the Court will dismiss

the petition if the conditions laid down in S. 13 are satisfied.

In that decision, This Court has further held that the fact that the debtor had been a recalcitrant debtor and was unable to pay his debts could not

justify the creditor, purely out of spite and with no other object in view to adjudge him bankrupt.

Keeping the above laid down principles in mind, if we consider the facts of the case on hand, we find that the creditors have satisfied that the

debtor-respondent owes them nearly rupees two lakhs. Though the creditors cannot claim the entire interest as recited in the promissory notes,

which is certainly exorbitant and usurious in nature, the creditors will be entitled to interest at a reasonable rate. The principal amount due to the

creditors is more than rupees two lakhs. The property of the respondent still available with him is sufficient to satisfy the debts of the creditors. No

doubt, the conduct of the debtor-respondent in denying the liability of the creditors-petitioners and selling his properties with a false recital that

such a sale is to discharge the debts due to the petitioning creditors is that of a vexatious and recalcitrant debtor and also with a view to delay the

payment to the petitioning creditors. But that by itself will not give a right to the petitioning creditors to choose a remedy available under the

Insolvency Act instead of proceeding against the available property of the debtor-respondent. Knowing the behavious and conduct of the debtor-

respondent, still the 2nd petitioner has chosen to advance a further sum of Rs. 20,000, even after the respondent-debtor has not chosen to

discharge his earlier debts by selling one of his properties under Ex. P. 15. As already pointed out, the 2nd petitioner has planned to purchase the

house property which was sold under Ex. P. 15, and also made an advance of Rs. 50,000 but that transaction did not go through. Therefore, it

appears that the petitioning creditors had chosen to the present adjudication proceedings more to disgrace the debtor-respondent rather than to

recover the amount due to them, which could have been done under the normal process of law. In the circumstances, even assuming that the

debtor-respondent has committed an act of insolvency, which actually has not been established, the petition is liable to be dismissed, u/s 13(4)(b)

of the Act, both on the ground that the debtor-respondent is able to pay his debts and also for ''other sufficient cause''.

In the result, the insolvency petition fails and the same is dismissed. No costs.

Petition dismissed.