Venkatachalam Chetty vs K. Poova Gounder and 3 others

This CMSA is directed against the order dated 30.3.92 passed by the District Court, Dharmapuri at Krishnagiri in CMA.No.37 of 1989.

The appellant herein got a decree against the first respondent in O.S.No.32 of 1978, O.S.361of 1978 and O.S.No.292 of 1982 and also filed

execution petition before the District Munsif Court, Karur. The respondents 2 to 4 are the other creditors of the first respondent and they were

also making arrangement to take necessary action against the first respondent. Only at that time the first respondent filed an application in I.P.No.2

of 1989 before the sub-court, Dharmapuri stating that the value of his property is lesser than his debts and he would not be able to satisfy the debts

and therefore prayed for an adjudication that he must be adjudicated as an insolvent.

The application filed by the first respondent was resisted by the appellant on the ground that the first respondent was having 5 acres of land with

a motor pump set. He was earning more than Rs.20,000 per annum. The first respondent also has not disclosed all his assets. Apart from the

assets listed in the petition the first respondent owns lands measuring 23 cents in Survey No.121/4 and also another 1 acre and the first respondent

is the absolute owner of those properties. The first respondents also has not disclosed the house property which alone would worth more than Rs

15,000. The first respondent was owning property worth more than Rs 80,000 and that therefore the value of his assets are more than the actual

debt and in the said circumstances he was not justified is having filled an application to declare him as an insolvent. The respondents 2 and 3 are

the sons-in-law of the first respondent and the fourth respondents is also related to the first respondents. The first respondents was having sufficient

means to pay the debts and therefore the petition filed by him to adjudge him as an insolvent is not at all maintainable.

The insolvency court had considered the case of the first respondent and the appellant herein. Section 10 of the Provincial Insolvency Act

prescribes the conditions on which a debtor can file a petition to adjudge him as an insolvent as follows:-

A debtor shall not be entitled to present an insolvency petition, unless he is unable to pay his debts and

(a) his debts amount to five hundred rupees; or

(b) he is under arrest or imprisonment in execution of the decree of any Court for the payment of money; or

(c) an order of attachment in execution of such a decree has been made, and is subsisting his property.

The insolvency court inferred that the appellant had taken necessary steps to bring the property of the first respondent in auction for the realisation

of the amount. But, however,'' it has found that the first respondent even more than Rs.500 to the appellant and that therefore clause(b) of section

10 of the Provincial Insolvency Act is attracted and in holding as it has come to the conclusion that the appellant was taking necessary steps either

to attach the properties of the first respondent or to arrest him and send him to civil jail and that the first respondent was not able to pay his debts

and allowed the petition by adjudge the first respondent as an insolvent. As against the same, the appellant herein preferred an appeal in

C.M.A.No.37 of 1989 before the District Court, Dharmapuri at Krishnagiri and which also confirmed the order of the insolvency court and

dismissed the appeal by its judgment dated 30.3.92. Aggrieved by the same, the appellant has preferred this appeal.

The lower appellate court has considered the facts and evidence and it came to the conclusion that the appellant had already obtained a decree

against him and also made arrangements to execute the decree either laid down by the courts that if it is satisfied prima facie that the petitioner

(insolvent) is unable to pay his debt and on being satisfied, it is not bound to hear any further evidence. Based upon the said principles to attach the

property or to arrest and sent the first respondent to the civil Jail. The first respondent was not in a position to pay the debts due to the appellant. It

had also considered the various conditions set forth in Section 10 of the Provincial Insolvency Act and came to the conclusion that the first

respondent satisfies the said condition. The lower appellant court also accepted the findings of the insolvency court and dismissed the appeal.

Aggrieved by the same, the appellant has filed this appeal.

The learned advocate for the appellant has submitted that the courts below have completely misdirected themselves in not having properly

appreciated the requirement u/s 10 of the Provincial Insolvency Act. Section 10(1) says a debtor shall not be entitled to present an insolvency

petition, unless he is unable to pay his debts. The learned advocate for the appellant has emphasised the requirements that ""he is unable to pay his

debts"". The said capacity of the first respondent was not properly considered by the courts below. According to the appellant, the first respondent

owns 5 acres of land with an electric motor pump set and was getting Rs.20,000 per annum. He was having other properties also. There is a house

which alone worth more than Rs.15,000. The lands belong to the first respondent is worth more than Rs.60,000 and he was also having

Rs.10,000 in cash. The insolvency court had taken into account all these things, came to the conclusion that the properties of the first respondent

was worth more than Rs.80,000 but his debts exceed more than the said amount and in the circumstances it was proper to treat the first

respondent as an insolvent and adjudge him as an insolvent. The primary requirement that the petitioner is unable to pay the debt was not at all

proved by the first respondent. Nowhere in his evidence he has stated that he made arrangements with available properties to discharge the debt

and he could not do so as the debts were more than the assets. That in the said event it should be construed that the first respondent has not

discharged the onus of proving that he is unable to pay his debts.

To support his contention that appellant relied upon the decision reported in Gajanand Vs. Income Tax Officer and Others, wherein it has been

said:

a substantial change was made in the law by the enactment of Provincial Insolvency Act of 1920, which for the first time made it a condition

precedent, for a debtor to entitle him to present an application for being declared an insolvent, to prove, prima facie, the he is unable to pay his

debts. It is only when the conditions prescribed u/s 10 of the Act have been fulfilled that court has no option but to admit him to the protection of

the insolvency court. This condition was absent in the Act of 1907 and, therefore, it was not then incumbent on the debtor, when presenting the

petition, either to allege his inability to pay his debts, or to prove the same to entitle him to an order from the court.

It is further observed thus:

The question which required determination in this appeal is whether on the basis of the material on record, the court could possible come to a

finding that the appellant was unable to pay his debts. When the appellant had deliberately omitted to mentioned certain valuable items of his assets

in his petition, and, when he had deliberately refused to assist the court in making an appraisal, by not disclosing the details of the Textile mills

wherein he owned his shares, or the value of the pearl necklace, it was impossible to come to a definite finding, even prima facie, mat the appellant

was unable to pay his debts. Unless the assets of the appellant, along with his liabilities, were fairly presented before the Court, for which a duty is

cast on the appellant under law, it cannot be held that the Court was in a position to come to a finding on the question about inability of the

appellant to pay his debts. In this view of the matter we are of the opinion that the finding of the learned Judge that the appellant was not entitled to

protection of Court was correct and must be upheld on the ground that he failed to discharge the onus cast on him under the law to prove that he

was unable to pay his debts.

It is argued on behalf of the appellant that the first respondent has not satisfied any of the conditions set forth in the above said decision and that

therefore the appeal has got to be allowed.

Usually the insolvency petition will not be allowed by having in mind that the debtor should not be encouraged by filing an application of this

nature and escape from their liability which is not proper and legal. If any lenient or liberal view is taken in adjudging a person as insolvent, it will

amount to opening of the flood gate and usually the courts would not be party to such an action. But in our case, the courts below have considered

that the petitioner has not disclosed all his assets and liabilities. Even as per the findings of the insolvency court the asset of the first respondent was

considered more than Rs.80,000 but it appears the debts are less than the asset. Further the respondents 1 and 3 in the petition are his own sons-

in-law and the fourth respondent was related to them. The courts below also have come to the conclusion that the petitioner has not disclosed all

his assets in the petition and therefore he has not complied with the conditions of Section 13(1)(e) of the Provincial Insolvency Act. Above all the

first respondent has not let in any evidence to show that he had taken efforts to discharge the debt and due to the value of the assets are less than

the value of the debts he could not do it and in the absence of the same it cannot be presumed that the petitioner was unable to pay his debts as

defined u/s 10(1) of the Provincial Insolvency Act. The basic requirement that the petitioner has to prove that he was unable to pay debt was not

properly considered by the courts below and there by they have committed an error in holding that the petitioner got to be adjudged as an insolent.

In the above said circumstances, I come to the conclusion that the first respondent has failed to prove that he was unable to pay his debt and the

same was not properly considered by the courts below and hence the findings of the lower appellate court are liable to be set aside and the same is

hereby set aside.

In the result, the C.M.S.A. is allowed. No costs.