Skip to content


Bava Jeer Chetti Vs. Bava Rangasawmi Chetti - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtChennai
Decided On
Reported in12Ind.Cas.618; (1912)22MLJ52
AppellantBava Jeer Chetti
RespondentBava Rangasawmi Chetti
Cases ReferredGirwardhari v. Jai Narain I.L.R.
Excerpt:
- - (1), of the provincial insolvency act iii of 1907. the district judge was of opinion that it was only in an application by a creditor that the court, under section 15 (1), has to be satisfied whether the debtor was able to pay his debts and whether, from any other sufficient cause, no order of adjudication should be made. the argument is not rested before us on section 15 (1). i agree with the district judge, in his construction of that section, that, whether the petition is by the debtor or by a creditor, the court has, under section 15, to be satisfied of the petitioner's right to present the petition. when the petition is by a creditor, it has to be further satisfied of the service of notice on the debtor and of the alleged act of insolvency. section 15 says that 'where the..........any punishment should be inflicted on him for fraudulent conduct. the matters to be decided at the time of adjudication are specified in the sections already referred to, but besides those specific matters, the court has power to refuse to make an order of adjudication on certain other grounds, such as the prevention of abuse of the process of the court and of the unnecessary harassing of a debtor, by a creditor. the question whether all the debts entered in the schedule are real or fictitious is not, in my opinion, one of those matters, nor is the question whether the debtor has concealed property belonging to him by omitting it from his schedule.9. the view which i have just expressed is in accordance with the decision of the calcutta high court in udayachamd matte v. ram kumar khara.....
Judgment:

Sundara Aiyar, J.

1. This is an appeal by a creditor against an order of the District Court of Trichinopoly, adjudicating the debtor an insolvent on his own application. The appellant in his statement in the lower court stated that all the debts stated in the debtor's petition except his own were non-existing debts at the date of the petition, having been previously discharged, and that the petitioner did not include in his schedule a house worth Rs. 1,000 which belonged to him. The learned District Judge, in his order, states that it was admitted before him that the debts due by the applicant exceeded Rs. 500. He disallowed the contention of the appellant that the court was bound to decide whether the debts which were questioned by him were real or fictitious debts and also whether the petitioner was really unable to pay his debts as stated by him in his petition. The argument appears to have been based in the lower court on the provisions of Section 15 Sub-S. (1), of the Provincial Insolvency Act III of 1907. The District Judge was of opinion that it was only in an application by a creditor that the court, under Section 15 (1), has to be satisfied whether the debtor was able to pay his debts and whether, from any other sufficient cause, no order of adjudication should be made.

2. It is contended in appeal before us that the District Judge was bound to consider, before passing the order of adjudication, whether it had been satisfactorily proved that the debts were real and that the petitioner was unable to pay his debts. The argument is not rested before us on Section 15 (1). I agree with the District Judge, in his construction of that section, that, whether the petition is by the debtor or by a creditor, the court has, under Section 15, to be satisfied of the petitioner's right to present the petition. When the petition is by a creditor, it has to be further satisfied of the service of notice on the debtor and of the alleged act of insolvency. When these facts are proved, the debtor is entitled to show that an adjudication ought not to be made because he is able to pay his debt or that, for any other sufficient cause, no order of adjudication ought to be made. The section is evidently borrowed from Section 7 of the English Act of Bankruptcy 1883 (46 and 47 Vic, Chap. 52) and the words of Section 15 (1) are in themselves clear.

3. It is necessary now to refer to a few of the sections of the Act, as to what matters have to be decided by the court before an order of adjudication is passed. Section 5 enacts that if a debtor commits an act of insolvency, a petition for adjudication may be presented either by a creditor or by the debtor, subject to the conditions specified in the Act. Section 6 lays down those conditions. Clauses 1 and 2 do not call for any observations in this case. Clauses 3 and 4 lay down that the debtor and a creditor, respectively, shall not be entitled to present a petition unless certain conditions are fulfilled. Clause 3, relating to the debtor's application, requires that his debts should amount to Rs. 500 and that either he should have been arrested or imprisoned in execution of a decree or there should be a subsisting attachment of his property for the satisfaction of some decree. Clause 4, relating to the creditor's petition, enacts that the debt due to the petitioning creditor should amount to Rs. 500 and should be a liquidated sum; and further that the act of insolvency on which the petition is grounded should have occurred within three months before the presentation of the petition. As already observed, the debtor should have committed an act of insolvency before a petition could be filed either by him or by a creditor. Section 4 lays down in what cases an act of insolvency would be committed. It is unnecessary to refer to the various acts enunciated in the section. It is enough to refer to Clause (f) which says that if the debtor petitions to be adjudged an insolvent under the provisions of the Act that would amount to an act of insolvency. In this case, therefore, the petitioner had committed an act of insolvency and his debts amounted to Rs. 500. He was, therefore, entitled to present the petition.

4. The further procedure is laid down in Sections 12 and 14 to 16. Section 12 provides that a date is to be fixed for the hearing of the petition and notices to certain parties should be issued. Section 14 is of importance for the decision of this case. It lays down that the court shall require proof that the creditor or the debtor is entitled to present the petition, that the required notices have been served, and that the debtor has committed the act of insolvency alleged against him. Other directions are contained in clauses a to 4 of Section 14 which I shall return to immediately. Section 15 says that ' where the court is not satisfied with the proof of the right to present the petition or of the service of notice, or of the alleged act of insolvency' (of all of which Section 14 requires proof to be adduced) 'the petition should be dismissed.'' Section 16 enacts that where a petition is not dismissed (as required by Section 15 in the cases referred to there in) and the debtor is unable to propose any composition or scheme which shall be accepted by the creditors and approved by the court, the court shall make an order of adjudication. It will be observed, from what has been adverted to thus far, that the matters of which proof is explicitly required by the provisions of the Act are only those set out in Section 14 (I) which have been already mentioned. Are there then any other matters which the court has to find proved before an ad judicating order is made The appellant's contention is that there are, and reliance is placed on the provisions of Clauses 2 and 3 of Section 14 and Clause (a) of Section 11 (1). The latter section requires that every insolvency petition presented by a debtor shall contain inter alia a statement that the debtor is unable to pay his debts. It is argued that it is to be inferred from this provision that the court should find, before an order of adjudication is passed that the debtor is unable to pay his debts. Section 14 (3) says 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.' Section 14 (2) provides that ' the court shall also examine the debtor, if he is present, as to his conduct, dealing and property in the presence of such creditors as appear at the hearing and the creditors shall have the right to question the debtor thereon.' There is no doubt that both these clauses require that the acts referred to therein should be done on the date when the petition for adjudication is heard. But it does not follow that every matter which forms the subject of the examination of the debtor should be decided before an order of adjudication is made. The examination is to be comprehensive with respect to the matters it may embrace. All his conduct and all his dealing with his property are the subject-matter of his examination. In my opinion, the object of this provision as to the public examination of the debtor in England is to obtain information, at as early a stage as possible, of the property and the whole conduct of the debtor in their relations to the insolvency proceedings. They are not all of them necessary for deciding the application for adjudication. They would be material in later stages of the proceedings when the debtor applies for his discharge and then they would be most valuable to enable the creditors to oppose his discharge. What the court has to decide before an order of adjudication, must be gathered from the sections which expressly deal with that point. Again Section 14 (3) certainly requires the court to grant time to the debtor or any creditor to produce evidence in certain cases. In what cases is it to do so? The answer given by the section is, the evidence, for the production of which time is asked for, must appear to the court to be necessary for the disposal of the petition.

5. The question therefore is, what is necessary for the disposal of the petition I may add that the debtor or the creditor asking for time must show sufficient cause to induce the court to grant time. That there may be other questions for decision than the mere fact of the commission of an act of insolvency and the service of notices and the right of the creditor or debtor to present the petition, I do not doubt. Thus, in an application by a creditor, the debtor is entitled to show that he is able to pay his debts or there is some other sufficient cause why the court should not make the order.

6. It has been repeatedly held that the court is entitled to see that proceedings in insolvency are not made an instrument of oppression by the creditor or of dishonest evasion to pay his debts by the debtor. The debtor may also show that he, within a reasonably short time, would be able to enter into an arrangement to satisfy all his creditors. It may also be shown by a creditor that the application for adjudication is really a bogus or sham proceeding.

7. It is not desirable that I should attempt to make an exhaustive statement of other reasons which may induce a court not to make an adjudication order.

8. I am of opinion that the court is to give time for the production of evidence only in the class of cases that I have just indicated. Section 14 does not lend countenance to the argument that the court is bound to decide questions relating to the conduct of the debtor or to the genuineness of the debts mentioned by him in his schedule or to questions relating to his honesty in his dealings with his creditors. Section 11 (1) requires that the debtor, in his petition, should make a statement that he is unable to pay his debts. But it is important to know that none of the Sections 14, 15 and 16 lays down that the court is to decide whether he is able to pay his debts or not, or whether it is to require proof of a statement by the debtor that he is unable to pay his debts. According to the English Bankruptcy Act, 1883, Section 4, a declaration by a debtor that he is unable to pay his debts is itself a commission of an act of insolvency, and Section 8 of that Act provides that a debtor's petition shall allege that the debtor is unable to pay his debts. According to that Act a receiving order is to follow immediately on the presentation of a petition of insolvency by the debtor. The policy of the Provincial Insolvency Act, 1907, departing from that which underlies the provisions of the Civil Procedure Code with respect to insolvency proceedings in mofussil courts, is not to enquire into the whole conduct of the judgment debtor and the questions relating to his indebtedness at one and the same time. That is what is required by Sections 351 and 352 of the Civil Procedure Code of 1882. The schema of Act III of 1907 is to make an order of adjudication at first and then to make a full enquiry into all matters aonnected with the insolvency before the question of the discharge of the debtor is decided. Section 26 of the Act authorises the receiver appointed by the court to apply for the striking out of any debt that may have been improperly entered by the insolvent in his schedule. The concealment of any property by the debtor and omitting it in the schedule may be enquired into under Sections 43 and 44. All these are questions which are considered material, in deciding whether an order of discharge should be passed in favour of the petitioner and whether any punishment should be inflicted on him for fraudulent conduct. The matters to be decided at the time of adjudication are specified in the sections already referred to, but besides those specific matters, the court has power to refuse to make an order of adjudication on certain other grounds, such as the prevention of abuse of the process of the court and of the unnecessary harassing of a debtor, by a creditor. The question whether all the debts entered in the schedule are real or fictitious is not, in my opinion, one of those matters, nor is the question whether the debtor has concealed property belonging to him by omitting it from his schedule.

9. The view which I have just expressed is in accordance with the decision of the Calcutta High Court in Udayachamd Matte v. Ram Kumar Khara (1910) 15 C.W.N. 213 as also with the judgment of the Allahabad High Court in Girwardhari v. Jai Narain I.L.R. (1910) A. 645. In the latter case, the learned Judges disapproved, and rightly if 1 may say so, of a former decision of another Bench of the same Court.

10. Two decisions of the Burma Chief Court have been referred to on behalf of the appellant which contain the same view of the scope of the enquiry as that adopted in the earlier decision of the Allahabad High Court and which was dissented from in the later case already referred to.

11. It is urged that the appellant was not permitted to cross-examine the petitioner at his examination on the date of hearing. But this allegation is unsupported by anything that appears on the record or by any affidavit of the appellant.

12. Having regard to the observations of the learned District Judge in the court below it may be that the appellant was not allowed to adduce certain evidence that he wished to. But as the matters that he alleged in his petition, and which apparently he wanted to prove by evidence, were not proper to be enquired into at the time of adjudication, the District Judge was not wrong in refusing to go into them at that stage.

13. I am of opinion that for these reasons the judgment of the lower court is right and I would dismiss the appeal with costs.

Ayling J.

14. I concur in the order proposed by my learned brother. The chief contention raised on behalf of the appellant is that it was the duty of the District Judge to enquire, and presumably determine, whether the petitioner was or was not able to pay his debts. This is not a very accurate summary of the allegations contained in the appellant's counter-petition dated 30th June 1908, the actual allegations therein being that the debtor had included fictitious debts in his schedule and concealed one item of property. I can find nothing in the Provincial Insolvency Act which would render it obligatory on the District Judge to enquire into allegations of this nature before passing an adjudication order. Section 14 of the Act compels him to do two things, and two things only. He must satisfy himself on the points marked (a), (b) and (c) in Sub-S. (1), and he must further examine the debtor in the presence of the creditors and allow the latter an opportunity of cross-examining the debtor. The requirements of the law appear to have been complied with in the present case. The only material question here in the three points (a), (b) and (c) is as to the amount of the debts, and we must accept the statement of the learned District Judge that this was admitted by the creditor. It is admitted that the debtor was examined, and it is not shown that the creditor was not given an opportunity of cross-examining the debtor.

15. The third sub-section referring to the court granting time for the production of evidence is made contingent upon sufficient cause being shown, which is tantamount to saying that it is within the discretionary power of the court.

16. I would not be understood as saying that the court is precluded from taking evidence and determining other points than those indicated. As pointed out in Girwardhari v. Jai Narain I.L.R. (1910) A. 645 such a power which may be necessary to prevent abuse of the process of the court may be held to be inherent and may be based on Section 47 of the Act read with Section 151 of the Civil Procedure Code of 1908. It is possible to imagine cases in which so much might be elicited in the course of the examination and cross-examination of the debtor that the court would be well advised to complete the enquiry and dismiss the petition at the preliminary stage. Such cases would, however, be rare and in the majority of cases, as pointed out in the case above quoted, enquiry into other matters than those which the court is bound to determine would be better postponed to a later stage. Certainly I see no reason to hold that this is one of the exceptional cases.

17. The order of the learned District Judge appears to me correct, and I agree with my learned brother that the appeal should be dismissed with costs.


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