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Ponnusami Chetti Vs. Narasimma Chetti and ors. - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtChennai
Decided On
Reported in(1913)25MLJ545
AppellantPonnusami Chetti
RespondentNarasimma Chetti and ors.
Cases ReferredGirwardhari v. Jai Narain I.L.R.
Excerpt:
- - according to the provisions of act iii of 1907, section 15 the court has to be satisfied, with the proof of the right to present the petition before it can pass an order of adjudication under section 16; if it is not so satisfied the petition should be dismissed. it is, in our opinion clearly not the object of the bankruptcy law to do so. we feel quite satisfied that the use of the bankruptcy law for a purpose foreign to its object must be held to amount to an abuse of the court's process. and that he will be discharged if he has not committed any act of bad faith regarding the subject of the application and if he complies with the provisions of the law of insolvency for the time being in force......' see page 4, halsbury's laws of england vol. ii. one object of the jaw is no doubt to enable a debtor unable to pay his debts to obtain protection from legal proceedings by the psrsons of whom he has incurred debts or liabilities. bankruptcy was at one time looked upon as a crime and even now it is considered to involve a change of status and to carry with it certain quasi-penal consequences. in roman law a defaulting debtor was subject not only to imprisonment but to harsh corporal punishment. see 5 cyclopoedia of american law and procedure, 248. the germ of modern bankruptcy statutes is found by writers on the subject in the roman cessio bonoram under which the debtor by surrendering all his goods to creditors obtained exemption from the penalties to which he was subjected under.....
Judgment:

1. This is an appeal against an order of the District Court of Salem refusing to adjudge the petitioner an insolvent on a petition put in by himself. He stated in his petition presented under Section 11 of the Provincial Insolvency Act III of 1907 that he was unable to pay his debts. His debts, according to him amount to Rs, 5,948-4-0. According to his statement of assets, besides a trifling sum of money in hand he admitted that as an undivided member of a Hindu family consisting of himself and his brother he had considerable other property. He estimated his share in family lands at Rs. 4485, of jewels at Rs. 4516 and of monies at Rs. 20,000. He also stated that he had debts due to him to the extent of Rs. 1,475, of which Rs. 1,000 is alleged to be barred by limitation. On this statement the District Judge dismissed his petition, holding that he could not be called an insolvent The petitioner's reason for seeking to be adjudged an insolvent, notwithstanding the fact that his assets were much larger than his liabilities, was that his brother would not give him his share of the family properties and that he and his brother had been quarrelling for the last 5 br 6 years. In his deposition he stated that his brother alleged that a division had already taken place and that the petitioner was not entitled to receive any thing from him.

2. On appeal it is contended that the judge was bound to adjudge the petitioner an insolvent as he had stated that he was unable to pay his debts as required by Section 11, Sub-section (1) Clause (a). Reliance is also placed in support of this argument on Section 4 Clause (b) which provides that ' a petition by a debtor to be adjudged an insolvent is itself an act of insolvency. ' It is admitted that the Court is not bound to adjudge a debtor an insolvent on his own petition, if to do so would result in an abuse of the process of the Court. But it is urged that the petition in this case was an honest one put in with the object of obtaining relief from undue pressure by creditors. The petitioner was arrested by the District Munsif's Court of Salem in execution of the decree in O.S. No. 719 of 1911 for Rs. 1733-9-0. This Court has held in Bava Jeer Chetti v. Bava Rangasami Chetti (1911) 22 M.L.J. 52 I.L.R. 36 M. 402 that a Court should not refuse to adjudicate a debtor an insolvent on the ground that the statement it) his petition that he was unable to pay his debts was untrue because some of the debts put forward were fictitious. See also Kalikumandas v. Gopa Krishna Boy (1911) 15 C.W.N. 990 Girwardhari v. Jai Narain I.L.R. (1910) A. 645 But the question in this case is whether the Court is bound to pass an order of adjudication when the debtor's petition itself shews that his assets are more than his liabilities, and the statement that he is unable to pay his debte is therefore obviously incorrect. Mr. Venkatarama Sastri, the learned vakil for the appellant does not contend that, if the allegation of inability to pay debts is the result of a mere arithmetical error in the calculating of the assets and liabilities, the Court is bournd to pass an order of adjudication. His contention is that the expression ' unable to pay his debts ' does not necessarily mean that the debtor should have less realizable assets than the amount of his indebtedness that, if his assets are of such a nature that he cannot get hold of them easily for discharging his debts, and must be regarded as unable to pay his debts, and that such is the case here, as the debtor said that his brother would not give him his share of the family properties. We have therefore to decide what the proper connotation of the expression 'unable to pay debts' is, as used in Section 11 of the Act. No decision on the' point has been brought to our notice. A person is ordinarily said to be insolvent where his liabilities exceed his assets, but this of course is pot necessary to enable a creditor to get an order of adjudication against a debtor. He is entitled to get such an order if the debtor has committed an act of insolvency as defined in Section 4, one of such acts being the debtor's petitioning to be adjudged an insolvent. There can be no doubt however, that everything which would be a ground entitling a creditor to get an adjudication order against his debtor would not justify an application by the debtor himself to be declared an insolvent. A voluntary petition by the debtor for an order of adjudication would certainly entitle a creditor to apply for an adjudication order against the debtor. One important object of the law of bankruptcy is to protect creditors against debtors who do not discharge their debts as far as possible out of the debtor's estate. Acts of Bankrupt. by are of three kinds, namely those which arise from dealings by a debtor with his property, those which consist of personal acts or defaults committed by him, and those which arise from the condition of his affairs showing him to be an insolvent. The essence of the first two classes of acts lies in the intention of the debtor to avoid or evade the payment of his debts. See Halsbury's Laws of England Vol. II p. 13. If a debtor declares himself unable to pay his debts that is an act which would justify a creditor in seeking to get an order of adjudication against him. But it does not follow that the debtor himself would be entitled to compel the Court to adjudge him an insolvent by making a declaration of inability to pay his debts. ' Bankruptcy is entirely the creation of statute Law. There is no such thing as a common Law of Bankruptcy. ' See page 4, Halsbury's Laws of England Vol. II. One object of the Jaw is no doubt to enable a debtor unable to pay his debts to obtain protection from legal proceedings by the psrsons of whom he has incurred debts or liabilities. Bankruptcy was at one time looked upon as a crime and even now it is considered to involve a change of status and to carry with it certain quasi-penal consequences. In Roman law a defaulting debtor was subject not only to imprisonment but to harsh corporal punishment. See 5 Cyclopoedia of American Law and Procedure, 248. The germ of modern bankruptcy statutes is found by writers on the subject in the Roman cessio bonoram under which the debtor by surrendering all his goods to creditors obtained exemption from the penalties to which he was subjected under the law. To relieve the debtor from the oppression of his creditors is one of the object of bankruptcy law. In exparte Painter : In re Painter (1895) 1 Q.B. 85 Vaughan Williams J. observed. ' But from an early period the legislature recognised the necessity that the state had in a debtor being relieved from the overwhelming pressure of his debts and that it was undesirable that a citizen should be so weighed down by his debts as to be incapacitated from performing the ordinary duties of citizenship.' That was the reason why, as pointed out by the learned judge, the law of England which in earlier times did not allow a debtor himself to present a bankruptcy petition, allowed him to do so by the Bankruptcy Act of 1849. But under what circumstances a debtor may do so Undoubtedly he may, if his liabilities exceed his assets. But the Court is not bound to, and will not, decide by anticipation whether the assets as they appear from the debtor's petition would, when they are realized, be necessarily less than the liabilities. The debtor is liable under the statute for any false statement he may make in his petition, but the order of adjudication will not be refused if on the statements contained in his petition he is entitled to the relief. But in our opinion he cannot claim it if the inability to pay his debts does not appear even on the allegations in his own petition. It may be that from what appears in the petition and the evidence before the Court, some of the assets admitted in the petition are of such a doubtful nature that the Court will accept the statement that the debtor is unable to pay his debts. According to the provisions of Act III of 1907, Section 15 the Court has to be satisfied, with the proof of the right to present the petition before it can pass an order of adjudication under Section 16; if it is not so satisfied the petition should be dismissed. There may be cases, besides those where the assets are of a doubtful value, where relief will not be refused if the judgment debtor states that he is unable to pay his debts, For instance, it may appear that t some of the assets must take a long time before they could be realized and that in consequence they may have no appreciable marketable value; and in the meanwhile the debtor may be liable to be harassed and oppressed by his own creditors. It may be right in such cases that the Court should not refuse to pass an order of adjudication on the ground that the Petition does not show the debtors inability to pay his debts. But at the same time it is in our opinion, impossible to hold that a debtor is entitled to be declared an insolvent on the mere ground that the property he actually has an hand is less than the amount of his debts. To hold otherwise would be to enable a man to appoint the Court as his administrator. Merely because he is unwilling to take the trouble to manage his own affairs and call in his assets or because, it may be, he is not thoroughly efficient in the administration of his own affairs. There are cases no doubt, where the law of the country entitles a person to get himself declared an incapable man and to place himself under the protection of a public officer. The Court of Wards Act makes provision for this in the case of certain landed proprietors. But the law of this country does not enable every person to do this. It is, in our opinion clearly not the object of the bankruptcy law to do so. The petitioner's prayer to be adjudicated an insolvent cannot be acceded to, because the statements in his petition do not, in the eye of the law contain an affirmation that he is unable to pay his debts; secondly it would be an abuse of the process of the bankruptcy law to enable the petitioner to use it for the purpose of getting the Court to realize his share of his family property from his brother. It does not appear either from his petition or from his evidence that there are such serious impediments in the way of utilising his assests for the payment of his debts either by realising them himself or by raising money by means of the credit that those assets must give him. It is contended that there has been no case in which it has been held that the petitioner's act amounts to an abuse of the powers of the Court, but on the other hand no case has been cited, and we are not aware of any, which has adopted the view that the law of bankruptcy may be used by any debtor merely for his own convenience to get his property administered and without any reason for inducing the Court to believe that it is necessary to give him relief for protecting him from oppression by his evidence. In England the Bankruptcy Act of 1883, Section 8 enacted that ' A debtor's petition shall allege that a debtor is unable to pay his debts and the court shall thereupon make a receiving order '. Notwithstanding the use of the word ' shall ' it has been repeatedly held that the Court is not bound to pass such an orderwhere to do so would amount to an abuse of the Court's process. See In re Bond (1888) 21 Q.B. 17 where the Court rescinded a receiving order passed on a joint petition by two debtors who were neither partners nor joint traders. The Court has no doubt to see whether the application in any particular case amounts to an abuse of its process. See Expirte Painter : In re Painter (1895) 1. Q.B. 85 where it was held that an application by a debtor possessed only of an inalienable pension, made with the intention of evading a judgment summons against him for payment of his debt by instalments did not amount to an abuse of the bankruptcy law; also In re Han-cock (1895) 1 Q.B. 85 in which it has been held that the fact of the debtor's intention being to avoid a committal order would not amount to an abuse of process where his property would still be liable for the debt in the bankruptcy proceeding. In re Betts (1888) 21 Q.B. 17 on the other hand where a debtor, with the intention of evading the committal orders made against him upon judgment summonses, presented a bankruptcy petition after having previously at short intervals and with the same object presented two other petitions upon which receiving orders had been made, the Court refused relief on the ground of the petition being an abuse of its process. We feel quite satisfied that the use of the bankruptcy law for a purpose foreign to its object must be held to amount to an abuse of the Court's process.

3. It is contended that in all cases where a debtor is arrested in execution of a decree he must be held entitled to be adjudged an insolvent. This argument is based upon certain provisions of the Civil Procedure Code. Section 55 Clause 4 enacts as follows. ' Where a judgment debtor is arrested in execution of a decree for the payment of money and brought before the Court, the Court shall inform him that he may apply to be declared an insolvent; and that he will be discharged if he has not committed any act of bad faith regarding the subject of the application and if he complies with the provisions of the law of insolvency for the time being in force. ' This provision does not entitle the debtor to be declared an insolvent when the application does not comply with the provisions of the insolvency law. Clause 4, no doubt entitles him to be released from arrest if he expresses his intention to be declared an insolvent, but if he is unable to comply with the provisions of the bankurptcy law, the Court would certainly have power to arrest him again as shewn by the same clause which provides that besides expressing his intention to apply to be adjudicated an insolvent he must furnish security to the satisfaction of the Court that he will appear when called upon in any proceeding upon the decree in execution of which he was arrested. We do not think that Section 54 shows that the mere fact of arrest in execution of a decree Entitles the debtor to an adjudication in insolvency whether he is in reality, able to bring himself within the provisions of Section 11 of the Insolvency Act or not. It may no doubt be urged that the result of this view might be that a judgment debtor who is not able to get in his assests readily might be unable to escape arrest and imprisonment at the instance of any creditor who has a decree against him. But the Court is, in our opinion, armed with sufficient power by Rule 40 of Order XXI to prevent such a judgment debtor being improperly harassed. It enacts that when ' it appears to the Court that the judgment debtor is unable, from poverty or other sufficient cause, to pay the amount of the decree the Court may, upon such terms as it thinks fit, make an order disallowing the application for his arrest and detention, or directing his release, as the case may be '. There is no reason why the petitioner in this case should not resort to the provisions of this rule for avoiding detention in jail if his conduct is such as to deserve protection from Court.

4. We see no reason for holding that the order of the District Judge dismissing the petition in this case is wrong. We dismiss the appeal with costs.


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