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Tara Chand and ors. Vs. Jugal Kishore and ors. - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtAllahabad
Decided On
Judge
Reported in(1924)ILR46All713
AppellantTara Chand and ors.
RespondentJugal Kishore and ors.
Excerpt:
.....by insolvency court before rejecting petition--payment by debtor pending hearing. - - the learned judge, as a rule, takes great trouble with his cases, but the sooner district judges in charge of insolvency matters learn that they must get to close quarters with a case and find the necessary facts before they attempt to apply the law the better, because this sort of thing causes a great deal of trouble and waste of time, and it is not sufficient for a judge to seize hold of a vague clause in the section that for some other sufficient reason' no order ought to be made, unless he makes it clear what that sufficient cause is, and what the surrounding circumstances of the case are. if, however, the case is not proved and the learned judge does not want to use the vague expression..........of the 'sufficient cause', then the court of appeal has a right to overrule the finding of the learned judge on the question of sufficient cause even though it is merely a question of discretion. if, however, the case is not proved and the learned judge does not want to use the vague expression 'for other sufficient cause', the failure in proof is sufficient in itself to enable him to dismiss the case.2. in this particular case, there were five petitioning creditors who did not put in an appearance, and if the learned judge had decided to dismiss the application on that ground, and on the ground that he was not satisfied with the attempted proof of their debts while they were absent from court, it would have been impossible to interfere with his decision, but unfortunately he has.....
Judgment:

Walsh, Acting C.J. and Ryves, J.

1. This case has never been heard. The learned Judge, as a rule, takes great trouble with his cases, but the sooner District Judges in charge of insolvency matters learn that they must get to close quarters with a case and find the necessary facts before they attempt to apply the law the better, because this sort of thing causes a great deal of trouble and waste of time, and it is not sufficient for a Judge to seize hold of a vague clause in the section that for some other sufficient reason' no order ought to be made, unless he makes it clear what that sufficient cause is, and what the surrounding circumstances of the case are. If when the Act is properly administered, the surrounding circumstances of the case are found to be such as to justify an order being made independently of the 'sufficient cause', then the court of appeal has a right to overrule the finding of the learned Judge on the question of sufficient cause even though it is merely a question of discretion. If, however, the case is not proved and the learned Judge does not want to use the vague expression 'for other sufficient cause', the failure in proof is sufficient in itself to enable him to dismiss the case.

2. In this particular case, there were five petitioning creditors who did not put in an appearance, and if the learned Judge had decided to dismiss the application on that ground, and on the ground that he was not satisfied with the attempted proof of their debts while they were absent from court, it would have been impossible to interfere with his decision, but unfortunately he has gone a great deal further and said a great deal which cannot be justified under the Act. He has said that payment was made between the filing of the petition and the hearing, that is to say, payment by the debtor to his creditors. There is no harm in that. An insolvency petition is a mode of execution. I have heard of a distinguished lawyer in London who, before I left England, had had 39 insolvency petitions presented against him, but he never had an order made because he always paid his creditor when he got before the Judge who was to hear the petition. A great many debtors get rid of petitions by paying the creditor; and a great many creditors utilize the petitions for the purpose of extracting payment. It is a lawful and a recognized method of extracting payment. When the debtor is reduced to a state of circumstances that his money is insufficient to go round and to pay every creditor who takes the trouble to press him by insolvency proceedings, then he is bound to submit to an insolvency order, and the law steps in and distributes his assets rateably amongst his creditors, but the law has never refused to reward a creditor who is diligent enough to take proceedings for enforcing payment of his debts. If anything, so far as the law in India is concerned, the chief complaint against it is that it does not reward the diligent creditor, and if the judgment under appeal were to stand, it would be another obstacle in the way of the diligent creditor.

3. The learned Judge has also said that insolvency proceedings are of a quasi criminal nature. If he was thinking of possible misconduct on the part of the insolvent, he would be perfectly correct, but we are unable to appreciate what bearing it has upon the question whether the petitioning creditor has proved his debt. In this particular petition there were five petitioning creditors and they alleged in substance two things, namely, that the debtor in order to evade payment to his just creditors had executed a fictitious mortgage-deed for Rs. 10,000 in favour of a fictitious creditor, whom we have allowed to argue the case on behalf of the respondents and who seems very anxious to maintain this order. If that is true, the insolvent has been guilty of an act of insolvency under Section 6. The petition goes on to allege that he is transferring all his property, which is also an act of insolvency, with a view to defeat and delay his creditors. It also alleges that these five creditors have debts which are unpaid. If the Judge is right that payments have been made to these creditors between the filing of the petition and the hearing, that is not a ground for dismissing the petition; it is all the better for the creditors, and if the process is continued frequently enough, it may result in their being paid in full. Mr. Baleshwari Prasad, representing the mortgagee creditors, contends that they have been paid as regards the major portion of their debts. Unfortunately that word does not occur in the judgment. Section 25 is rather a trap for Judges who do not take pains to understand it. When an act of insolvency is alleged, as in this case, the learned Judge must first satisfy himself whether the creditor is a creditor for the amount alleged, or for a sufficient amount to justify a petition under the Act, or, in other words, that the creditor has a right to present the petition. The court must then be satisfied of the service on the debtor of the order admitting the petition. It must then be satisfied or express its dissatisfaction, for adequate reasons, with the alleged act or acts of insolvency. It must then consider whether it has been satisfied by the debtor that he is able to pay his debts. We may mention by the way that Mr. Baleshwari Prasad contends that the learned Judge was satisfied that the debtor either had paid or was able to pay his debts. How he discovered that the Judge was satisfied we are unable to say, because the Judge has said nothing about it in his judgment, and we can only take notice of what he says in his judgment, but it will be open, on the re-hearing of the petition, for Mr. Baleshwari Prasad's clients to persuade the learned Judge the next time to put in his judgment what he says he has unfortunately omitted on this occasion. In conclusion, when the learned Judge has come to all the necessary findings on the issues which we have indicated above, and he still finds that there is prima facie ground for making an order against the insolvents, he must consider whether there is any other sufficient cause why no order should be made. If, on the other hand, he has found that the issues to which we have referred have not been made out against the insolvents, he will dismiss the petition without considering any other sufficient cause. But he must take either one or the other of those two courses. What 'other sufficient cause' means under this section, we do not venture at this moment to say. It is a matter which has been much debated in the English courts in certain cases, and we have not yet succeeded in meeting anybody in these provinces who knows what exactly was intended by this provision. All we can do is to say that, when the learned Judge has decided the other issues and has given his reasons and stated in the ordinary form upon an issue of law what the other sufficient cause is, we shall be prepared on appeal to adjudicate upon it and decide whether it is adequate or not.

4. The appeal must be allowed, and inasmuch as Mr. Baleshwari Prasad's client is a creditor who is obviously an interested party and has some very good reason for wanting to uphold the order, he must pay the costs of the appeal. The matter will be remitted to the learned District Judge to re-hear the petition according to law and the costs of the first and second hearings will abide the result.


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