1. This revision is, directed against the order passed by the learned Principal District Judge, Salem, reversing the order passed by the learned Second Additional Subordinate Judge, Salem.
2. The facts which are necessary for understanding the points involved in the revision can be shortly stated as follows: One late V. Sundaram filed a petition against the petitioner herein for adjudging him as insolvent in I. P. No. 67 of 1974 on the allegation that he had executed a promissory note in his favour on 6-1-1974, and subsequently in order to defraud his debt and other creditors, he executed a sale deed on 19-3-1974, in favour of his nominees in respect of his properties and also in view of his unequivocal declaration of his inability to pay the debts and suspension of the payment of the debts. The petitioning creditor died on 14-9-1975 and his legal representatives came on record as petitioners 2 to 9 in I. P. 67 of, 1974. The insolvency petition originally was allowed on 18-9-1976 and as per the order of remand passed by the appellate court, the matter was remanded for fresh disposal and the same was allowed to be dismissed for default on 12-7-1978 and again it was restored to file on 4-8-1978. Subsequently, the advocate for the legal representatives reported no instructions in the insolvency petition on 14-4-1981, and thereafter, they did not take any interest. The first respondent herein, who is the petitioner before the lower court, had advanced a sum of Rs. 12000 to the same debtor on 11-6-1974, and he has filed an application under S. 16 of the Provincial Insolvency Act, on 26-9-1978 for substituting himself in the place of the petitioning creditor in the main petition itself. It was alleged in the petition that the legal representatives are not evincing any interest in prosecuting the insolvency petition and by virtue of an arrangements the 8th respondent debtor has filed a lodgment schedule for depositing the amount due to the legal representatives of the petitioning creditor and that they are not diligently prosecuting the insolvency petition. The said application was resisted by the 8th respondent-debtor and he contended that the promissory note executed in favour of the first respondent herein, who was the petitioner in I. A. 383 of 1978, is subsequent to the alleged act of insolvency, and hence, he is not entitled to take advantage of the said act of insolvency and consequently he could not get himself substituted as a petitioner. The other respondents have filed a counter stating that they would abide by the orders passed by the Court.
3. The learned Subordinate Judge dismissed the application. On appeal, the learned District Judge reversed the said finding and allowed the application. Hence this revision.
4. The learned counsel for the petitioner here in Mr. Venkdtasubramanian, contended that in the instant case, the alleged act of insolvency was on 19-3-1974, and that the promissory note in favour of the first respondent came into existence only on 11-6-1974, and that the insolvency petition was filed on 17-6-1974, and since the debt in favour of the first respondent itself came into existence subsequent to the act of insolvency alleged, the first respondent herein is not entitled to the relief prayed for in the application. According to the learned counsel, the insolvency petition was filed under Ss. 6 and 9 of the Provincial Insolvency Act and S. 9 of the Act lays down three conditions for filing a petition by the creditor, viz-
(a)the debt owing by the debtor to the creditor, or, if two or more creditors join in the petition, the aggregate amount of debts owing to such creditors, should amount to five hundred rupees;
(b) the debt should be a liquidated sum payable either immediately or at some certain in future time, and
(c) the act of insolvency on which the petition is grounded should have occurred within three months before the presentation of the petition.
The learned counsel drew my attention to the decision in S. Basker and Co., v. M. T. V. Veerasikku Gounder, AIR 1958 Mad 379 : ILR (1958) Mad 404 wherein it was held that as there was no debt in existence on the dates when the acts of insolvency alleged in the petition were committed, the petition was not maintainable in view of proviso to S. 9(l)(b) of the Provincial Insolvency Act. The learned counsel also invited my attention to the decision in District Board, Bijnor v. Mohammad Abdul Salam, AIR 1947 All 383 wherein also it was held that -
'The word 'creditor' as used in Ss. 6(b), 7, 9(l) and 54 does not include person who becomes creditor or debtor after the date of the transfer or other act of insolvency. Hence, such a creditor cannot apply for the adjudication of the debtor as insolvent.'
For the same proposition, he relied on the decision in M. R. P. R. Muthiah Chettiar v. Lakshminarasa Aiyar (1921) 13 Mad LW 141 : AIR 1921 Mad 62 and Chhabihar Singh v. Mrs. E. M. Baines, AIR 1936 Lah 800. The learned counsel relying on the principles laid down in the above decisions contended that as petitioner (first respondent herein)admittedly became creditor after the act of insolvency, even though prior to the filing of the insolvency petition, is not entitled to maintain the application for adjudication under Ss. 6 and 9 of the Provincial Insolvency Act, and the lower appellate Court erred in allow in the appeal, and as such the revision has to be allowed.
5. The learned counsel for the first respondent submitted that these rulings are applicable only to cases of filing the main petition for adjudication of the debtor as an -insolvent under Ss. 6 and 9 of the Provincial Insolvency Act, and not to an application filed under S. 16 of the said Act. These decisions were not under S. 16 of the said Act, and there was no scope for considering the application 'under S. 16 of the Act in those cases. On the other hand, the learned counsel submitted that a Division Bench of this court in Dinavahai Venkata. Hanumantha Rao v. Yerugulapati Gangayya ILR(1928) Mad 594: AIR 1928 Mad 608 held that -
'Where a creditor applies to have his debtor adjudicated an insolvent but would not proceed with his petition, another creditor, whose debt was not barred by limitation on the date of the original petition, can be substituted as petitioner, under S. 16 of the Provincial Insolvency Act 1920, and be allowed to continue the petition, even though his debt might be barred by limitation on the date of the substitution, provided he was otherwise qualified to be a petitioning creditor under the Act.'
It was held. in that decision as follows -
'The object of the section is to prevent other creditors from-being injured by-the action of one creditor, who, by reason of collusion or otherwise, say not diligently prosecute the petition. If it is to be regarded as a new petition, this object is frustrated and there is no purpose in having a section of the kind. If the original petition had proceeded up to adjudication or if another creditor whose debt is not barred by the date of substitution is substituted, and obtained an order of adjudication, the appellant's debt which was not barred by the date of the petition could be proved. if so, we see no reason why he cannot be substituted. The words as, petitioner in the section show that, on substitution, the petition becomes his petition with the original date and it is enough if the debt was an enforceable debt on the original date'.
6. Yet, another decision of this Court reported in Bysani Venkataratnam Chetti v. R. Venkatayya of Kadiri, ILR 1942 Mad 316: AIR 1942 Mad 172, wherein it was held by a Division Bench of this court consisting of King and Happell JJ. That -
A creditor who is substituted under S. 16 of the Provincial Insolvency Act can not be compelled to prove the qualification of the original creditor to file a petition in insolvency; and the mere accident of the fact that the creditor who has filed the petition should turn out not to have been qualified to do so can not prevent a substituted creditor from talking advantage of its date and the act of insolvency, mentioned therein.'
7. The learned counsel for the first respondent drew my attention to the main insolvency petition filed by late V. Sundaram, wherein the debt of the first respondent herein also was referred to and in paragraph 4 of the counter of the petitioner herein also the said debt has not been disputed, except contending that he is related to the debtor. It was contended by the learned counsel for the respondent that the requirements of an application under S. 16 of the Act is to satisfy only the condition in S. 9(l) of the Act viz, to satisfy the court that the debt incurred by the debtor exceeds more than Rs. 500 and all other qualifications for filing a petition are not necessary for the substitution under S. 16 of the Provincial Insolvency Act.
8. On going through the order passed by the learned District Judge also I find that the learned Judge has considered all these decisions in a proper perspective,, and had arrived at a correct finding. The learned ,Counsel for the first respondent also drew my attention to S. 28(7) of the Provincial Insolvency Act, wherein it has been provided .that 'An order of adjudication shall relate back to, and have effect from the date of the presentation of the petition on which it is made.' Admittedly, the first respondent herein was a creditor on the date of the application and if any adjudication is made, he is also entitled to prove his debt and claim rateable. In these circumstances, as rightly observed by the lower appellate Court, there is no reason why the first respondent herein' who, though was not a creditor on the date of the alleged act of insolvency but became a creditor before the filing of the application for adjudication, should be deprived of the benefit of the petition by the failure of the original petitioning creditor, or his legal representative as in this case, to diligently prosecute the petition for adjudication. Under S. 2(a) of the Provincial Insolvency Act, 'creditor is defined as 'creditor includes a decree-holder. It is nowhere stated that the word 'creditor occurring in S. 16 of the Act relates to a person who was a creditor on the date of the alleged act of insolvency. No other point was urged by the learned counsel for the petitioner.
9. For all these reasons, I am of the view that the order passed by the learned Principal District Judge is perfectly legal and correct and I do not find any infirmity to interfere with the said order.
10. In the result, the revision fails and it is dismissed. There will be no order as to costs.
11. Revision dismissed.