1. The question at issue in this appeal is whether a certain Sathrasala Appayya has or has not been rightly adjudicated an insolvent. The petition upon which the order of adjudication has been passed was originally filed by one of his creditors on 25th August, 1934 and stated that the act of insolvency was the execution of a mortgage deed by the debtor on the 17th of August, of that year. In 1937 the second petitioner was allowed to continue the insolvency under the provisions of Section 16 of the Provincial Insolvency Act, as the Court was satisfied that the original petitioner was not proceeding with due diligence. At the enquiry into the petition it was held that the second petitioner's debt entitled him to ask for the adjudication of the insolvent as such and on the question of the nature of the mortgage executed by the insolvent there was no contest. His adjudication accordingly followed.
2. One of the arguments taken against the adjudication was by the present appellant who is another creditor of the insolvent and was proceeding in execution against him at the time of the insolvency petition. His point was that the first petitioner was not in fact a creditor of the insolvent at all, and therefore under Section 9 of the Act was not entitled to present this petition in August, 1934, and that when the second petitioner was allowed to continue the petition in 1937 it was incumbent upon him not to prove his own status as a creditor for more than Rs. 500 but to prove the status of the first petitioner as such a creditor, and that as he has failed to do this, the order of adjudication must be set aside and the matter remanded for further enquiry. The appellant in the lower Court relied in, support of this argument upon a case reported in Chockalingam Chettiar v. Muthiah Chettiar : (1938)2MLJ390 . This case has not been discussed by the learned District Judge and we cannot see in what way any such discussion would be material to the solution of the present issue. On the other hand the respondents relied upon a case reported in Venkata Hanumantharao v. Gangayya : AIR1928Mad608 . That is also a case of the substitution of one creditor for another creditor under the provisions of Section 16. That substitution took place at the time when the second creditor's debt had become barred by limitation. It was held by this Court that in spite of that fact, substitution might be allowed and the second, creditor might continue the petition, taking advantage of the date on which it was originally presented. This ruling also does not deal directly with the point now in issue but as will be shown presently, it seems to us to proceed upon principles which may fairly be applied to the facts of the present case also.
3. In the argument in appeal, learned Counsel for the appellant has referred us to an English case, In re Mound, Ex parte Maund (1895) 1 Q.B. 194. That was a case in which a petition in bankruptcy was filed by three creditors, who had occasion to fear that the Court would find that the amount of their debts did not entitle them to file the petition. They then sought to amend their petition by joining with themselves two other creditors, so that the total indebtedness of the five might qualify them for taking action. At that time more than three months had elapsed from the date of the alleged act of bankruptcy. It was held by the Court that such amendment could not be allowed and it is stated in page 197:
It is perfectly clear that the Court ought not to allow, after three months have elapsed from the date of the committal of the act of bankruptcy, the introduction of creditors, as petitioning creditors, who could not themselves present a petition, and the introduction of a debt which, after the same period has elapsed, would not be a debt upon which a petition could be founded.
This case is to some extent analogous with the case which is now before us, but we are not prepared to follow it where the facts are so dissimilar. In the English case, as has been stated, the three creditors who originally presented the petition were continuing to prosecute it, and merely wanted to strengthen their position by joining two other creditors with themselves. In the present case an order under Section 16 presumes the fact that the original petitioner does not proceed with due diligence on his petition. The English decision was not therefore upon any provisions in the English Bankruptcy Act which correspond to Section 16. In those circumstances, we do not feel ourselves called upon to consider whether the principles upon which the English decision was given could be applied to the facts of this case. On the other hand, Venkata Hanumantharao v. Gangayya : AIR1928Mad608 , deals directly with the question of Section 16, and it points out that 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 may not diligently prosecute the petition. Venkata Hanumantharao v. Gangayya : AIR1928Mad608 , gives the second creditor in a case of this kind the benefit of the date of the original petition, no matter how much later may be the date of his own introduction into the case; and we see no reason on principle why a second creditor, as in the present case, should not have the benefit of that date not only in regard to the question of whether his own debt is barred by limitation, but in regard to the question of the act of insolvency of the insolvency himself. If it once be conceded that the purpose of Section 16 is that the general body of creditors should be benefied, and if it also be remembered that other creditors will very probably hold their hand and decline to file unnecessary insolvency petitions themselves when they know that one creditor has already done so, we do not think that 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 should prevent a subsequent creditor, who but for that petition might well have filed one himself, from taking advantage of its date.
4. One further point of practical importance appears to us to support the view that the Legislature can hardly have expected a creditor substituted under Section 16 to be compelled to prove the qualification of the original creditor to file a petition, and that is, that in the circumstances of the case, it would inevitably be difficult for one creditor to prove the existence of another creditor's debt. The original creditor who ex hypothesi has no further interest in the case would naturally be in possession of the necessary documents, and have knowledge of the necessary evidence.
5. On these grounds we see no good reason to interfere with the decision of the learned District Judge and dismiss this appeal with costs.