1. This is an appeal from an order passed in insolvency proceedings. The applicant, Beni Prasad, was adjudged insolvent on 29th November 1930. He was directed to apply for his discharge after the expiry of a year. He applied within that time for a protection order under Section 31, Provincial Insolvency Act, on 2nd May 1931, but his application was rejected.. After expiry of one year, on 27th November 1931, he applied for his discharge. This application was also not granted, but he was directed to apply for his discharge after the expiry of six months. Before the expiry of that period, one of the creditors, namely Shyam Lal, applied, on 20th February 1932, for his arrest and imprisonment in civil jail and the appellant was arrested and committed to prison. On the same date, that is, 20th February 1932, he applied for a protection order. The application was dismissed by the learned District Judge of Aligarh. The present appeal is from his order refusing to grant protection.
2. The order appealed from proceeds on the solitary ground that a previous application for protection was dismissed on 2nd May 1931, and no circumstances have since come into existence which can justify a protection order. Referring to the previous order, dated 2nd May 1931, I find that protection was refused for the following: reasons:
There are heavy debts about which the insolvent keeps no accounts. A very large amount of debts is said to have been incurred on account of a cocaine case. The amount is said to be Rupees. 2,600. I am not prepared to believe that so much was spent in a cocaine case. Nor do I believe-that he spent so much over his illness as he means-to show. I refuse the application for protection order.
3. I do not think a previous order refusing protection is a bar to a protection order being made at a subsequent stage. Lapse of time and the fact that no misconduct can be attributed to the insolvent in the mean time are circumstances which may justify a Court in granting an order of protection which has been previously refused. Section 31, Provincial Insolvency Act, is so worded as to confer a wide discretionary power on the insolvency Court. The discretion is not to be exercised arbitrarily but with due regards to the circumstances of each case.
4. I am unable to understand the reasons on which the order of 2nd May 1931, proceeds. It has been already quoted, and the only thing definite which can be gleaned from it is that the appellant was heavily in debt. Most insolvents are heavily in debt. No order of adjudication is ordinarily passed un-I less the debts of an insolvent exceed the value of his assets. This is hardly a ground for refusing to pass a protection order. Some reference is also made to the debt having been incurred on account of a cocaine case. The Judge did not positively find that it was so. He merely mentions the fact that a 'large amount of debt is said to have been incurred on account of a cocaine case.' In the next sentence he discredits this assertion. At the same time he disbelieved the insolvent's story that the debt had been incurred by him because of his illness. The order then winds up by a refusal to grant protection. I do not think that the order of 2nd May 1931, was passed on any ground amounting to more than some vague prejudice in the mind of the learned Judge against the appellant. If a debtor has been adjudged insolvent, has placed all his assets at the disposal of the insolvency Court without concealing any material facts relating to his pecuniary position and has not been guilty of any fraud or dishonesty in relation to his creditors or his estate, an order of protection should ordinarily be granted. Refusal to grant protection in spite of the insolvent having done all he could be expected to do may lead to grave abuses.
5. A creditor may feel tempted to apply for the arrest of the insolvent, not because he is believed to be in a position to pay but to coerce his well-to-do relatives, who may feel obliged to satisfy the claim of such creditor in the interest of the honour of the family. In my opinion, unless some misconduct or want of good faith can be imputed to an insolvent, a protection order should not be refused on vague and general assumptions. In the present case the order appealed from does not proceed on any ground of its own, but is based solely on the view expressed in the order of 2nd May 1931 and on the absence of anything further having happened since. It should be observed that the appellant was arrested subsequent to the order of refusal of 2nd May 1931. There is nothing to suggest that he has since been released. There is no suggestion that beyond his inability to pay he did anything to defraud or baffle his creditors or attempted to give undue preference to one or more of them or concealed his assets. No act of dishonesty is even alleged. In all these circumstances, I hold that the lower Court should have passed the order of protection prayed for by the appellant. Accordingly I allow this appeal, set aside the order of the lower Court and grant an order of protection from arrest and imprisonment in execution of Shyam Lal's decree. I refuse to pass a general order of protection as the appellant can apply for his discharge and if he does so all aspects of the case will come under review.