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Bonala Lakshmaiah Vs. Sagu Pullayya and ors. - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtAndhra Pradesh High Court
Decided On
Case NumberCivil Revn. Petn. No. 1031 of 1957
Judge
Reported inAIR1960AP600
ActsProvincial Insolvency Act, 1920 - Sections 9 and 10
AppellantBonala Lakshmaiah
RespondentSagu Pullayya and ors.
Appellant AdvocateM. Venkatasubba Rao, Adv.
Respondent AdvocateV.V. Krishna Murthy, Adv.
DispositionPetition dismissed
Excerpt:
.....adjudication of respondents as insolvents - original creditor withdrew and substituted by another creditor - whether insolvency petition is maintainable by reason of addition of third creditor beyond three months approved under section 88 (1) - held, substitution would result in third creditor taking place of original creditor ab initio and entitled to prosecute respondents. - all india services act, 1951.sections 8 & 11 & a.p. buildings (lease, rent and eviction) control rules, 1961, rule 5: [v.v.s. rao, g. yethirajulu & g. bhavani prasad, jj] refusal by landlord to receive rent - deposit of rent in court - held, a tenant has the option to take recourse to section 8 in case of refusal or evasion by landlord to receive rent and if landlord were to not name a bank or refuse even the..........court, narsaraopet.3. the relevant facts of the case may be briefly stated. two petitioners (creditors) filed i. p. no. 9 oi 1954 in the court of the subordinate judge, narasaraopet against four respondents praying tor an adjudication of the first and second respondents as insolvents. they relied for the insolvency on the fact that the tirst respondent was unable to pay his debts and that he executed a fraudulent sale deed for ac. 2-15 cents in favour of the third responent on 23-11-1953 and that in order to defeat the creditors, he suffered a collusive decree in o. s. no. 279/1953 filed by the fourth respondent.the first respondent himself admitted iu his counter that he was unable to discharge his debts. the second and third respondents remained ex parte. the fourth respondent.....
Judgment:
ORDER

Anantanarayana Ayyar, J.

1. This is a petition to revise the judgment and order of the additional District Judge, in C. M. A. No. 1/56 confirming the judgment and order of the Subordinate Judge, Narsaraopet in I. P. No. 9 of 1954, adjudicating the 4th respondent herein as an insolvent.

2. For the sake of convenience, the parties herein are referred to by their denomination in I. P. No. 9/54 on the file of the subordinate Judge's Court, Narsaraopet.

3. The relevant facts of the case may be briefly stated. Two petitioners (creditors) filed I. P. No. 9 oi 1954 in the court of the Subordinate Judge, Narasaraopet against four respondents praying tor an adjudication of the first and second respondents as insolvents. They relied for the insolvency on the fact that the tirst respondent was unable to pay his debts and that he executed a fraudulent sale deed for Ac. 2-15 cents in favour of the third responent on 23-11-1953 and that in order to defeat the creditors, he suffered a collusive decree in O. S. No. 279/1953 filed by the fourth respondent.

The first respondent himself admitted iu his counter that he was unable to discharge his debts. The second and third respondents remained ex parte. The fourth respondent contested the application inter alia that the alleged debts were not true, that they were set up by the first respondent in order to thwart the execution of the decree obtained by him, that the first respondent had means to discharge his debt and that the Insolvency petition should be dismissed. During the course of the enquiry, one of the creditors of the fourth respondent filed I. A. No. 736 of 1955 under Section 16 of the Provincial Insolvency Act (hereinafter referred to as the 'Act') to add him as a party on the ground that the second petitioner, colluding with the first respondent, was not proving his debts and prosecuting the petition, and therefore, he as creditor to whom the first respondent owed Rs. 600/- should be added as a petitioner. Thereupon, he got himself impleaded as the third petitioner. In the counter then filed by the fourth respondent, he did not allege that the petition was being filed out of time and could not be entertained. The learned Subordinate Judge found that the first respondent was indebted to the first and third petitioners to an extent of over Rs. 500/- and that the acts of insolvency had been proved and adjudicated the first respondent alone as insolvent. The fourth respondent preferred C.M.A. No. 1 of 1956 in the Court of the Additional District Judge, Guntur, who confirmed the order of the trial court. Hence this revision.

4. Learned counsel for the fourth respondent has raised the following two points for consideration in this revision :

1. Whether the Insolvency petition is not maintainable by reason of the addition of the-third creditor beyond the period of three months of act of insolvency as provided in Section 8(1)(c) of the Act?

2. Whether the acts of insolvency alleged have been proved? POINT 1 :

5. As regards the first contention, learned counsel for the fourth respondent invites my attention to the decision of the Rangoon High Court in Murugappa Chettyar v. A. C. Galliara, AIR 1934 Rang 87. In that case, a person under Section 13 of the Act seeking permission to include a plea that the act contemplated of was done with intent to defeat or delay creditors was filed and it was rejected on the ground that it was not a formal amendment as it altered the substance of the art of insolvency alleged and also as it was represented more than three months after the act of ins Ivency alleged. That decision has no bearing on the facts of the present case.

6. In Chockalingam Chettiar v. Muthiah Chettiar, 1938 Mad LJ 390: AIR 1938 Mad 884, the original peition was sought to be amended in order to determine the debt which became due to the petitioning creditor by an award subsequent to the filing of the petition and it was accordingly allowed, The test that is laid down is described in the language of Wright, J. as follows:-

'Every debt sought to be added as ground of the petition after three months from the date of the act of insolvency, is unavailable for that purpose, but if within that period, a debt had been made ground of petition and it afterwards becomes desirable to add another party to the petition in support of that debt, leave may be given to join that other party as a petitioner where it will not lead to any injustice.'

The idea is put in a slightly different language by Vaughan Williams, J. :

'Is the effect of the amendment to introduce a debt which, after the period has elapsed, would not be a debt upon which the petition can be founded? '

The above decision was referred to and quoted with approval by Panchapagesa Sastri, J. in Karuppiah v. Veerabadrai). : AIR1951Mad456 , where a partner was sought to be added and the petition was accordingly amended,

7. The petition filed here to add the third petitioner as a petitioning creditor was filed under Section 16 of the Act which reads:-

'Where the petitioner does not proceed with due diligence on his petition, the Court may substitute as petitioner any other creditor to whom the debtor may be indebted in the amount required by this act in the case of a petitioning creditor.' The object of the Section Is to serve as a check on the fraud of a creditor who has presented the application for insolvency and to prevent other creditors from being injured by the action of the former who by reason of collusion or otherwise, may not diligently prosecute the petition and to give the other creditors the benefit of the date of the original petition, no matter how much later be the date of their own introduction into the case. This act of the petitinning creditor colluding with the proposed insolvent may happen at any time after the filing of the petition and if the petition happens to come for enquiry more than 3 months after the act of insolvency, it cannot be said that no new creditor can be substituted for the petitioning creditor and the purpose (if the act cannot be defeated by objecting to any new creditor coming on record.

As has been pointed out in Ganga Nath v. Zalim Singh, AIR 1932 All 147, it is open to the Insolvency Court to substitute another creditor in the place of the original petitioning creditor although the application of the former for being so substituted is made more than three months after the act of insolvency, on which the petition is grounded. The effect of such substitution would be that the substituted creditor takes the place of the first creditor ab initio and is entitled to prosecute the original petition as if it was his own petition. Vide Sathappa Chettyar v. A. S. Chettyar Firm, AIR 1929 Rang 291. To the same effect is the decision of the Madras High Court in Venkata Hanumantha Rao V. Gangayya, AIR 1928 Mad 608, wherein it was held that when the petitioning creditor does not proceed with the petition, any other creditor can be substituted though the debt due to the latter had become barred by the date of substitution provided that it was enforceable on the date of the original petition. Respectfully, following the above decisions I hold that the objections that the third Petitioner was added beyond time cannot be entertained.

8. With regard to the debts due to the first petitioner, both the Courts below have found that the debt, due under Ex. A.1, a pronote executed by the first respondent for Rs. 275/- is proved by the evidence of P. W. 1. The second petitioner did not choose to examine himself to prove the promissory notes Exs. A.2, A.3 and A.4 or the passing of consideration thereunder, Learned Counsel for the petitioners relics on a decision in Abdul Shakur v. Kotwaleshwar Prasad, (S) : AIR1956All403 (F. B.) and contends that the presumption mentioned in Clause (1), of Section 118 of the Negotiable Instruments Act can be invoked in insolvency proceedings where an alleged debt against the insolvent is called in question.

But it may be pointed out that the presumption is only with regard to the passing of consideration. Here the execution of the promissory notes itselt is being questioned as having been brought into existence collusively. Neither the promisee nor the promisor has been examined to deny that charge or about the fact of execution. Hence, it cannot be said that those debts have been proved. The third petitioner examined himself as P.W.2 and deposed to the effect that he got the promissory note Ex. A.8 executed by the first respondent in favour of one Narayan for Rs. 460/- transferred in his favour as per the endorsement in Ex. A.7 and that Ex. A.6 is a renewed promissory note executed in his favour by the first respondent.

Though the fourth respondent has contended that this is also a collusive debt, he has not even chosen to examine himself and speak to the same after the third petitioner was added. The totality of the debts due to the first and third petitioners, which have been proved, comes to over Rs. 500/-beyond doubt or dispute. So, the requirements under Section 9(1)(a) are satisfied in the instant case, Hence it cannot be said that the petition is not maintainable. POINT 2:

9. As regards the acts of insolvency alleged, namely (i) suffering a collusive decree in favour of the fourth respondent and (ii) execution of a fraudulent deed in favour of the third respondent, both the Courts below have concurrently found on a careful consideration of the evidence, that they were true and that hence the first respondent is liable to be adjudged as insolvent. As has been pointed out in Ramaswami v. Narayanaswami, AIR 1925 Mad 483 (2), where the insolvent himself has pleaded that be is unable to pay his debts, there is no purpose in closely scrutinising the acts of insolvency. It has not been shown to me how the findings of the courts below in this behalf are wrong or untenable. I see no reason to differ from the lower Courts on this point.

10. In the result, I confirm the order of the lower courts and dismiss the revision petition with costs.


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