Skip to content


Bonagiri Yellalu Vs. Nagulvaram Chenchu Subbaiah - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtAndhra Pradesh High Court
Decided On
Case NumberCivil Revn. Petn. No. 92 of 1970
Judge
Reported inAIR1972AP221
ActsProvincial Insolvency Act, 1920 - Sections 10(1) and 25(1)
AppellantBonagiri Yellalu
RespondentNagulvaram Chenchu Subbaiah
Appellant AdvocateJagannadha Rao, Adv.
Respondent AdvocateP.V. Subbarao, Adv.
Excerpt:
.....error which was condemned by the :privy council is strong language. but the requirements of the news act although different must be satisfied as the petition is under the new act. the learned district judge therefor has clearly erred in allowing the appeal......provincial insolvency act and the change brought about in section 10 was not noticed by the learned judge who decided that case.6. section 10(1) in so far as it is relevant reads as under:'a debtor shall not be entitled o present an insolvency petition, unless he is unable to pay his debts and---------- '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) ....................................... (c) ....................................... the proviso to section 24(1)(a) may also be read:the provided 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.....
Judgment:

Gopal Rao Ekbote, J.

1. The respondent herein filed an application under Sections 10(1)(c), 13(1) and 20 of the Provincial Insolvency Act alleging inter alia that he is a debtor and is indebted to the persons mentioned in Schedule A. He has property mentioned in Schedule B. He being unable to discharge the debts, he wanted himself to be adjudicated as an insolvent.

2. The petition was resisted by the 1st respondent therein. His main contention was that the debts contracted were bogus and the creditors were mostly the petitioner's relatives. He asserted that the petitioner was in a position to pay the debts of the creditors. He asserted that the petitioner was in a position to pay the debts of the creditors. He sold some of the property and therefore he had cash also.

3. The learned Subordinate Judge after making a proper enquiry held that the petitioner is in a position to discharge the debts and as a result dismissed the application.

4. Aggrieved by that order of the learned Subordinate Judge, the petitioner carried the matter in appeal, C. M. A. No. 29 of 12968 to the District Judge. The leaned Additional District Judge reversed the order of the trial Court mainly on the ground that the debtor-petitioner has a statutory right to be adjudged an insolvent and his petition cannot be dismissed merely because he does not disclose his assets. In other words, the learned Additional District Judge found that it is unnecessary for the petitioner-debtor to prove that he is unable to discharge the debts in order to get an order of adjudication in his favour.

5. 1st respondent to the petition therefore filed C. R. P. No. 92 of 1970 in this Court. Ramachandra Raju. j. has referred the case to a Bench as he was of the opinion that Venkata Janikamma v. Venkateswara Rao, 1955 Andh LT 14 requires reconsideration. Rao, 1955 Andh LT 14 requires reconsideration. He thought that the said decision has followed Charapat Singh Dugar v. Kharaj Singh Lachirma, ILR 44 Cal 535 = (AIR 1916 PC 64), a decision given under the previous Provincial Insolvency Act and the change brought about in Section 10 was not noticed by the learned Judge who decided that case.

6. Section 10(1) in so far as it is relevant reads as under:

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

'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) ....................................... (c) ....................................... the proviso to Section 24(1)(a) may also be read:

The Provided 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 and when so satisfied, shall not be bound to hear any further evidence thereon.'

7. Whatever may have been the position under the old Act, Section 10 makes it abundantly clear that a debtor shall not be entitled to present an insolvency petition unless it is proved that he is unable to pay his debts. It is therefore an essential pre-requisite for debtor-petitioner to get an order of adjudication to satisfactorily establish that he is unable to pay his debts. That requirement of Section 10 therefore has to be necessarily satisfied by the debtor.

8. What all the proviso to Section 24(1)(a) says is that the debtor-petitioner shall be required to furnish only such proof as to satisfy the Court that there are prima facie grounds for believing that he is unable to pay his debts. It vests discretion with the Court. Unless the Court is satisfied that there are prima facie grounds for believing that a debtor petitioner, for the purpose of proving his inability to pay his debts, has furnished prima facie proof, the Court shall not be bound to hear any further evidence thereon. That proviso relates to the procedure at the hearing and does not absolve in any manner the debtor-petitioner from the obligation of proving that he is unable to pay his debts as is required under Section 10(1) of the Act. There is essentially no conflict between Section 10(1) and the proviso to Section 25(1)(a).

9. It is no doubt true that ILR 44 Cal 535 = (AIR 1916 PC 64) was a case which was decided under the old Provincial Insolvency Act. There has been change in the wording of Section 10 of the Provincial Insolvency Act of 1920. And as stated above, it now requires the debtor-petitioner to establish that he is unable to pay his debts. That apart, Sir Lawrence Jenkins in his speech said:---

'It is to be regretted that Courts in India allowed themselves to be influenced by this plea instead of being guided to their decision by the provisions of the Act. In clear and distinct terms the Act entitle a debtor to an order of adjudication when its conditions are satisfied. This does not depend on the Court's discretion but is a statutory right; and a debtor who brings himself properly within the terms of the Act is not to be deprived of that right on so treacherous a ground of decision as an 'abuse of the process of the Court.' This case illustrates the peril of this doctrine in India for what has been treated by the Courts below as such an abuse appears to their Lordships in no way to merit this censure'.

10. It would immediately be evident that the Privy Council also insisted that whatever was the provision in the old Act the requirement of the provision must be satisfied before an order of adjudication is passed. The Privy Council emphasized that once the debtor-petitioner fulfills the requirements of the statue, then he is entitled to get himself adjudicated as insolvent. Thereafter it does not depend upon the discretion of the Court to so adjudicate him or not. The Privy Council condemned the practice which prevailed in India to dismiss such application in spite of such proof on the ground that it would be an abuse of the process of the Court, obviously because on that ground the statute never required the petition to be dismissed. The said decision of the Privy the satisfaction or otherwise of the relevant provision under which the debtor petitioner makes the application and he is required to satisfy certain requirements before he is adjudicated insolvent. Even if it has been decided under the old Act, it still holds goods because even under the new Act, it still holds good because even under the new Act unless the requirements of the new Act unless the requirements of Section 10 are satisfied by the debtor-petitioner, he cannot be adjudicated insolvent. That is what the Privy Council also insisted although the decision was under the old Act. The said decision is still good because on no irrelevant ground the petition can be dismissed. And once the debtor-petitioner satisfies all the requirements of Section 10, he is statutorily entitled to get himself adjudicated as insolvent.

11. In 1955 Andh LT 14, Umamaheswaran, J. has undoubtedly referred to the said Privy Council decision. He remarked that in spite of the warning administered by the Privy Council it was unfortunate that the District Munsif committed the same error which was condemned by the :Privy council is strong language. In that case the District Munsif had dismissed the application on the ground that it was not a bona fide application but was made with the ulterior motive of evading the maintenance of respondents 1 and 2 and the debt due to the Government. On appeal, the learned District Judge set aside that order of the District Munsif and adjudicated the petitioner as Munsif and adjudicated the petitioner as insolvent. The Civil Revision Petition filled against the order of the District Judge was dismissed by the learned Judge. He rejected the contention that the application that it was not a bona fide one. And it is only while dealing with that contention before him that he made reference to the Privy Council case and relied upon it for that purpose.

12. We do not therefore read the said decision of Umameheswaram, J. as deciding anything which can be said to be contrary to Section 10(1)(a) of the Act. It is neither inconsistent with the said Privy Council decision in that respect, nor can it be said that it goes contrary to what is stated in Section 10(1)(a) of the Act. It does not therefore, in our judgment, require any reconsideration because it lays down the law correctly. That this is so could not be disputed by the learned Advocates appearing for the parties. The requirements under the old Act may be different. But the requirements of the news Act although different must be satisfied as the petition is under the new Act.

13. The learned District Judge obviously went wrong in understanding the said Privy Council decision. It nowhere lays down that even if the debtor-petitioner does not prove his inability to pay the debt, he would have still a right to be adjudicated as insolvent. The debtor-petitioner no doubt has a statutory right but the question of such a right arises only when he satisfies all the requirements of Section 10 of the Act. Bereft of Section 10, he does not have any statutory right to get himself automatically adjudicated insolvent. If the debtor-petitioner as and when he satisfies the requirement of Section 10, it is only then that he has statutory right to be adjudicated insolvent and his petition cannot be dismissed on grounds which are not referred to in Section 10 or other provisions of the Act. The learned District Judge therefor has clearly erred in allowing the appeal. Since, however, he haw not considered the question which really arises in the appeal, that is, able to discharge his debts as alleged by him in his petition, we have no other alternative than to remit the case to the learned District Judge for disposal of the appeal in accordance with law and in the light of what is stated above.

14. We would therefore allow the Civil Revision Petition set aside the order of the learned District Judge, and remit the case for a fresh disposal in accordance with law. The cots of this Civil Revision Petition will depend upon the result of the case.

15. Revision allowed.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //