P.P.V.C.T. Chidambaram Chettiar vs Daivanai Achi

Cornish, J.—The petitioner before me was adjudicated insolvent on the consolidated petitions of six creditors. The act of insolvency was a

transfer of property effected by Ex. A in favour of four persons, creditors and relations, which transfer was alleged to be a fraudulent preference.

The document, Ex. A, was described as a security bond. It recited the petitioner''s inability to pay the amount due to them, and gave them landed

property as security. In determining whether this was a fraudulent preference the lower Court took into consideration evidence of other transfers

made by the petitioner in favour of other relations who were likewise creditors. It was contended that in so doing the lower Court misdirected

itself. Ex. A is dated 20th October 1932. Six sale-deeds in favour of the petitioner''s wife for an aggregate amount of Rs. 67,000 were proved to

have been executed by him between 23rd May 1932 and 8th February 1933. Besides there was a conveyance to petitioner''s daughter of

property for Rs. 47,000 on 2nd December 1932, and on the same date a conveyance to his brother''s son for Rs. 25,000. I think that proof of

these other transfers was relevant to the question of the petitioner''s intention in executing Ex. A. In In re Ramsay (1913) 2 KB 80 it was held that

evidence of other acts of preference committed by the debtor shortly before and shortly after the particular act of preference alleged as an act of

insolvency was admissible. Phillimore, J., said:

I think that, when one has to look into the mind of the bankrupt, any act of his at the time or about the time, any matters in pari materia may be

looked into to see what was passing in his mind.

For the same reason I hold that this cluster of other transfers in favour of his relations in the present case are so similar and sufficiently close in

point of time to Ex. A that they were rightly admitted as evidence. Then it is said that the release deed Ex. I executed by the tranferee of Ex; A

indicates that the petitioner had no intention to favour these creditors. But Ex. I was given only after the filing of the insolvency petition and I think

that this circumstance discounts any value it might otherwise have had in this direction. Lastly, it has been strenuously contended that the insolvency

Court ought to have exercised its power in favour of the debtor u/s 25, Provincial Insolvency Act, because the Court should have been satisfied

that the debtor was able to pay his debts. If a balance of assets over liabilities is alone enough to prove solvency this argument would succeed. In

his schedule the debtor showed his assets at Rs. 11 lakhs and liabilities at Rs. 6 lakhs odd. The lower Court was not apparently entirely satisfied

with the correctness of the debtor''s valuation. But the debtor in his evidence stated that it would take him 18 months to realise and pay his

creditors. It seems to me that the scheme of Section 25 is that a debtor, in order to escape adjudication on a well founded petition and act of

insolvency, must satisfy the Court that he has a present ability to pay creditors, and it is not sufficient for him to show that he will be able to pay in

the more or less distant future. In Pratapmull Rameshwar v. Chunilal Jahuri 1933 60 Cal 345 it was held that Section 13(4)(b), Presidency

Insolvency Act, which is not materially different from Section 25(1), of the Provincial Act meant that the debtor is not so embarrassed that he

cannot meet his debts in the ordinary way by making legal tender and discharging his debts. This, the petitioner before me was on his own evidence

unable to do. In my judgment, therefore, this revision petition fails and is dismissed with costs. The creditor in C.R.P. 1020 will also get his costs

out of the estates.