1. This is an appeal by one of the creditors under Section 75, Insolvency Act against the order of the District Judge, Jodhpur, dated 22-11-1952 adjudicating the respondent Jawrilal as an Insolvent.
2. Learned counsel for the appellant has urged that he had raised two contentions in the lower Court and requested it to give him an opportunity to substantiate the same but that request was arbitrarily rejected and hence the order of that Court may be set aside and it should be directed to record the appellant's evidence and then proceed to decide the matter afresh.
It is pointed out that the first contention raised by the appellant was about the jurisdiction of the Court and the second one was to the effect that the respondent was a monied men and that he was in a position to pay up his debts.
3. Learned counsel for the respondent has urged that according to the proviso of Section 24(1)(a). Provincial Insolvency Act, the Court was not bound to hear any further evidence when it was satisfied from the 'respondent's evidence that there were prima facie grounds for believing his Inability to pay up his debts.
In support of his contention, learned counsel has referred to Manindra Nath Roy v. Basik Lal AIR 1927 Cal 69 (A). In that case it was held that the object of the said proviso was quite obvious and the Court need not go into an elaborate enquiry as to the validity or otherwise of the debts. It is sufficient if the Court is satisfied that there are prima facie grounds for thinking that the debtor is unable to pay his debts.
It is clear that in the said case what was challenged by the creditor was the validity of the debts. It was also contended in that case that the valuation of the mill which was one of the main assets of the debtors was made without any notice to the creditors. It was in that connection that the said observation was made by the learned Judges.
It is true that the proviso to Section 24(1)(a) contemplates that the Court need not enter Into an elaborate enquiry about the debtor's inability to pay his debts. But at the same time Sub-section (3) of the same section provides that the Court shall, if sufficient cause is shown, grant time to the debtor or to any creditor to produce any evidence which appears to it to be necessary for the proper disposal of the petition.
If the debtor's application is not opposed by creditors, then the debtor's mere statement may be sufficient. But, where such an application is opposed, then it would not be proper for the Court to shut the evidence of the other party by saying that the debtor's sole statement is sufficient to satisfy the Court about his inability to pay his debts.
Learned counsel has next referred to the case of Bholai karaim v. D. D. Desai, AIR 1927 Rang 329 (2) (B). In that case, the debtor's application for adjudication was dismissed by the lower Court. On appeal, it was held that the debtor had established a prima facie case and that his application should not have been refused. It doesnot appear if in that case the debtor's application was contested and, therefore, it is not of any help to the respondent.
Learned counsel has further referred to the case of Kaka v. Nandoo, AIR 1930 Lah 644 (C). In that case it was observed that Section 24 does not contemplate a searching enquiry when the debtor applies to be adjudicated an insolvent. It appears that in that case the District Judge had dismissed the debtor's application.
It was contended by the creditors that the debtor had entered some fictitious items in the schedule and it was in that connection that it was observed that the said ground was not good enough for refusing his application if otherwise the debts were found to be more than Rs. 500 and he was unable to pay that amount.
This case also is of no help to the respondent. On the other hand, it may be pointed out that in the case of Ganeshlal v. Sanehiram, AIR 1933 Pat 43 (D), it was observed as follows:
'There has been a tendency for Courts administering the Insolvency Act to believe that the hearing of a petition is a more or less formal matter and that if a petition is as it were merely verified by the evidence of the debtor the Court is bound to accede to the petition. That is not the case.
It is the duty of the Court to be satisfied prima facie and after following the necessary procedure and making the necessary investigation to come to a conclusion that the statements by the debtor are true. After all the procedure of insolvency is for the protection of creditors quite as much as for the protection of the debtors.
It is unfortunately more often used by debtors than by creditors with the consequence that the interest of the creditor has a tendency to be forgotten.'
4. Similarly in the case of Ramdeo v. Freetam Singh, AIR 1936 Rang 108 (E), it was held that where, in case of an application by a debtor for being adjudicated insolvent, the creditors contended that although the debtor has been rearrested once in execution, yet there is no reason to believe that he is unable to pay his debts, the Judge was entitled and in fact bound to take evidence tendered to him and pass the order.
It would thus appear that in a case where a debtor's application for being adjudged an insolvent is not contested by the creditors and the Judge is satisfied that the debtor is unable to pay his debts, he need not hear further evidence. But where the debtor's application is contested by the creditors then it would not be proper for the Judge to ride rough-shod over the rights of the creditors and say that he is satisfied from the debtor's statement alone about his inability to pay his debts and that he is not going to hear tine creditors Or entertain their evidence on that point.
It is true that he need not make an elaborate or searching enquiry at this stage, but he must give hearing and equal opportunity to both the parties. In the present case, it appears from the record of the lower Court that on 25-10-1952 the Court examined the debtor. Thereafter the appellant creditor requested the Court that evidence from his side should be recorded, but the Court disallowed his request and fixed 15-11-1952 for arguments.
Arguments, however, could not be heard on that day and so the case was fixed for 22-11-1952 and the order in dispute was passed on the same day. It is clear from the reply which was filed by the appellant in the Court below that he contested the jurisdiction of the Court to hear this application on the ground that the respondent was living at Bombay.
The application was further contested on the ground that the respondent had enough property in his possession to pay up his debts. It is not impossible that even after recording the appellant's evidence, the Court may come to the same conclusion as it has arrived at present. But such a result, cannot and should not have been anticipated and it was the duty of the Court to give fair opportunity to the appellant to substantiate his contentions by the evidence which he wanted to produce.
The trial Court was perhaps guided by considerations of saving time, but sometimes an undue haste only results in causing more delay and the present case is an instance of that kind. In my opinion, the appellant is entitled to get a chance to lead his evidence and satisfy the lower Court, if possible, about the truth of his contention.
5. The appeal is therefore allowed. Thelower Court's order is set aside. The case be sentback to that Court with direction that it shouldgive an opportunity to the appellant to producehis evidence on the contention which he has raised and thereafter it should proceed to decide thecase afresh. The costs in this appeal will abidethe result in that Court.