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Chavakula Venkatakrishnayya Vs. Talluri Malakondayya and anr. - Court Judgment

LegalCrystal Citation
SubjectProperty
CourtChennai
Decided On
Reported inAIR1942Mad306; (1942)1MLJ38
AppellantChavakula Venkatakrishnayya
RespondentTalluri Malakondayya and anr.
Cases ReferredPenakaruppan v. Arunachalam
Excerpt:
- .....before us could not have been advanced. it is argued that there is no act of insolvency when a sale in execution has been held and that sale has not been confirmed or having been confirmed, has been set aside as a result of a deposit under rule 89 of order 21, civil procedure code.3. there appears to be no decided case covering this actual point. two cases have been quoted, lal chand v. bogha ram a.i.r. 1938 lah. 819 and. kanailal v. tinkari de : air1933cal564 in which it was held that the date of the sale for the purpose of limitation to an application under s. '9 of the provincial insolvency act is not the date of the confirmation, but the date of the actual sale. 'we have also been referred to colkett v. freeman (1787) 2 t.r. 60 : 100 e.r 33 in which it was held that a clear and.....
Judgment:

Wadsworth, J.

1. The petitioner here was adjudicated an insolvent on a creditor's application under Section 9 of the Provincial Insolvency Act, and the order of adjudication was confirmed in appeal. The civil revision petition challenges the correctness of this appellate order.

2. The grounds on* which the adjudication was challenged in the Courts below relate to the subsistence of the debt in favour of the petitioning creditor, having regard to an alleged agreement for sale and also having regard to a possible retrospective Operation of Act IV of 1938. These contentions are not now pressed. The argument before us has been confined to the question whether the judgment of this Court in C.M.A. Nos. 330 to 332 whereby the Court sale which formed that act of insolvency has been set aside, would warrant the cancellation of the order of adjudication. The judgment referred to was passed on the 23rd October, 1941, so that at the time of the adjudication and also at the time when the appeal to the lower Court was heard, the contention which has been urged before us could not have been advanced. It is argued that there is no act of insolvency when a sale in execution has been held and that sale has not been confirmed or having been confirmed, has been set aside as a result of a deposit under Rule 89 of Order 21, Civil Procedure Code.

3. There appears to be no decided case covering this actual point. Two cases have been quoted, Lal Chand v. Bogha Ram A.I.R. 1938 Lah. 819 and. Kanailal v. Tinkari De : AIR1933Cal564 in which it was held that the date of the sale for the purpose of limitation to an application under S. '9 of the Provincial Insolvency Act is not the date of the confirmation, but the date of the actual sale. 'We have also been referred to Colkett v. Freeman (1787) 2 T.R. 60 : 100 E.R 33 in which it was held that a clear and unequivocal act of bankruptcy such as suspension of payment cannot be explained away by the subsequent circumstance that the creditor was paid. It seems to us that none of these cases really touch the point which we have . to decide. Under Section 6 (e) of the Provincial Insolvency Act a debtor commits an act of bankruptcy if any of his property has been sold in execution of the decree of any Court for payment of money. Under Order 21, Civil Procedure Code, we find both in Rule 89 and in Rule 90 the words 'where any immovable property has been sold in execution of a decree'' used to indicate a sale which has been held and awaits confirmation and one which is liable to be set aside either as a result of a deposit or as a result of an objection to the procedure. That is to say, the words 'property has been sold in execution of a decree'', when used in Order 21, Civil Procedure Code, refer not to an indefeasible sale, but to a sale which has . been actually held but which may be set aside as a result of subsequent proceedings. It seems to us that there is no apparent necessity for giving greater weight to the words in Section 6 of the Provincial Insolvency Act than they carry in the relevant rules of Order 21 to which Clause (e) of Section 6 of the Provincial Insolvency Act Naturally has reference. The enumeration of the various acts of insolvency in Section 6 seems to contemplate those acts which in the public eye shake the credit of a debtor and are likely to cause a scramble amongst tie creditors for his assets. The man may actually be solvent, but may still commit an act of insolvency by suffering something to be done which shakes his apparent credit, as when he disappears from his normal dwelling house or hides himself from his creditors or under the corresponding provision of the Presidency Towns insolvency Act, suffers some attachment of his property in execution of a decree to subsist for 21 days. All these are outward and visible signs that a man's credit has been shaken and they are circumstances which are likely to cause a panic amongst his creditors. Consequently they justify any creditor, in asking the Court to step in and see that there is a fair distribution of the debtor's assets.

4. Having these considerations in mind it is but natural that the Legislature should lay down as one of the criteria for judging whether a man's ostensible credit has been shaken, the fact of a sale in Court of his assets in execution of a decree. The question whether the sale is eventually set aside for some irregularity or whether the debtor eventually finds it to his interest to deposit the amount of the particular decree is not really material. It is the very fact that his circumstances are sufficiently embarrassed to make him to submit to a sale of his property,, which justifies the creditor in asking the Insolvency Court, to take charge of his estate.

5. We have had our attention drawn to a Full Bench decision in Penakaruppan v. Arunachalam : AIR1940Mad375 to which we were both parties in, which it was held that an adjudication based on an alleged fraudulent preference would necessarily have to be cancelled or annulled on a judicial finding that there was no fraudulent preference. But that decision apart from its being concerned with the question whether the adjudication is to be annulled or not seems to us to depend on quite different considerations. If there is no fraudulent preference there is no act of insolvency and a judicial finding which binds the parties that there has been no such fraudulent preference, destroys once and for all the basis of the insolvency. But as we read Section 6 (e) when there has in fact been a sale in' : execution a subsequent deposit whereby the sale is set aside or a1' subsequent objection founded on some material irregularity resulting in the setting aside of the sale, will not alter the fact' that the property was sold in execution of the decree. 'We do not wish to say anything which will be read as deciding that an insolvency petition could or could not be maintained on the strength of a sale which had been set aside before the insolvency petition was presented; nor do we wish to prejudice any application to annul the adjudication which might be preferred on the basis that the setting aside of the sale is a sufficient reason for the annulment of the insolvency. These are matters with which we are not now concerned : We confine ourselves to holding on the facts of this case that the property of the insolvent has been sold in execution of a decree, notwithstanding the fact that this Court in appeal has set aside the sale and we are of opinion that the setting aside of the sale is not a sufficient reason for cancelling the order of adjudication in revision.

6. In this view we dismiss the civil revision petition with costs.


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