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P. Thangaraju Pillai Vs. Periaswamy Pillai and ors. - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtChennai High Court
Decided On
Reported in(1982)1MLJ274
AppellantP. Thangaraju Pillai
RespondentPeriaswamy Pillai and ors.
Cases ReferredChatrapat Singh Dugar v. Khwrag Singh
Excerpt:
.....these circumstances, he submitted that the inquiry conducted by the trial court as well as by the learned district judge in appeal cannot be regarded as being in excess of their jurisdiction. besides, the scope of the enquiry with a debtor's petition which are now clearly provided for under the proviso to section 24(1)(a) were not in terms enacted in the earlier act. venkatraman, learned counsel for the the respondents, that the insolvency court was well within its rights in allowing the respondents to cross-examine the debtor after he was examined in chief, but the introduction, at the stage of cross-examinat on by the respondents, of documentary evidence, does in my judgment, enlarge the scope of the enquiry beyond the legitimate bounds of section 24 proviso. it may be observed that..........section 10 of that act for adjudicating himself as an insolvent. his petition was dismissed by the learned district munsif, kulithalai, that decision was confirmed in appeal by the learned district judge, tiruchirapalli.2. in his petition filed under section 10 of the act, the petitioner stated that he owed debts to the extent of rs. 3,750 to respondents 1 to 6 and that respondents 1 to 3 had filed execution petition for his arrest for the realisation of the decree debt due to them. he further stated that the total value of the assets owned by him, amounted to only rs. 250. respondents 1 to 3, who are the petitioner's sons, opposed the application. they alleged that the debts set out in the schedule to the petitioner's application, included certain fictitious items. they further stated.....
Judgment:

V. Balasubrahmanyam, J.

1. This revision is brought before this Court under Section 75(1) of the Provincial Insolvency Act, 1920 by the debtor who filed an application under Section 10 of that Act for adjudicating himself as an insolvent. His petition was dismissed by the learned District Munsif, Kulithalai, that decision was confirmed in appeal by the learned District Judge, Tiruchirapalli.

2. In his petition filed under Section 10 of the Act, the petitioner stated that he owed debts to the extent of Rs. 3,750 to respondents 1 to 6 and that respondents 1 to 3 had filed execution petition for his arrest for the realisation of the decree debt due to them. He further stated that the total value of the assets owned by him, amounted to only Rs. 250. Respondents 1 to 3, who are the petitioner's sons, opposed the application. They alleged that the debts set out in the schedule to the petitioner's application, included certain fictitious items. They further stated that the petitioner owns lands of an extent of 45 cents worth Rs. 5,000 and that this item of property would be enough to discharge the debts. They also referred to Maligai business carried on by the petitioner which, according to them, would yield Rs. 200 per mensem by way of earnings,

3. The learned District Munsif held an inquiry into the petition. At the inquiry, the petitioner was examined as P.W. 1. In the course of his evidence, he stated that he had no property and that the maligai shop, which he had, had been closed He denied that the schedule of debts included fictitious items. He also referred to the land of the extent of 45 cents and said that this land was assigned to him by the Government but it had since been resumed by the Government. In cross-examination by respondents 1 to 3, an adangal extract marked a Exhibit B-1, dated 17th November, 1964 relating to the fasli 1370 in respect of S. No. 657 in Thenbagam village, was put before the petitioner and he was cross-examined by the respondents on that subject. The petitioner accepted that Exhibit B-1 was the adangal in respect of the land of extent of 45 cents, but it had since remained uncultivated. In any case, it had been subsequently resumed by the Government. He further stated that he did not file the order of the Government, resuming the land. It may be observed that no questions were asked in cross-examination by the respondents as to the value of the said land.

4. The respondents also filed Exhibit B-2 the certified copy of a decree in O.S. No. 164 of 1965, on the file of the Sub-Court, Tiruchy. The decree was obtained by respondents 1 to 3 and their mother as against the petitioner herein. This decree was relied on to show that the petitioner had some share in the properties set out in the said decree.

5. The learned District Munsif, relying on the adangal extract and the partition decree (Exhibits B-1 and B-2) held that the petitioner had concealed a number of properties and hence there was no ground for holding that he was unable to pay debts. The learned District Munsif did not give any finding in regard to the existence of the maligai business.

6. From the judgment in the appeal it would appear that the learned District Judge had accepted the evidence of the petitioner that he had closed the maligai shop long ago. The learned District Judge, however, held that the petitioner did not disclose his ownership of 45 cents of land and the suppression of this land, as an item of his assets, was an abuse of theprocess of Court. The learned Distric Judge did notice that Exhibit B-1 the adangal extract related only to the fasli 1370 i.e., for the year 1960-61. But the learned Judge proceeded to hold that there was no evidence to show that subsequently, the land had been resumed by the Government. The learned Judge was prepared to assume the value of the said item of property as Rs. 5,000, which was very much more than the total debts which were scheduled in the petition. On these reasonings, the learned District Judge held that there was a wilful suppression of an item of asset whose value was more than the total-debts payable by the debtor and this was a clear case of abuse of process of Court. He accordingly dismissed the appeal andconfirmed the order of the District Munsif dismissing the petition.

7. In this revision petition brought by the petitioner, Mr. E. Padmanabhan, his learned Counsel made two submissions. The first was that the Courts below had misconceived their jurisdiction in so far as they had embarked upon an inquiry which was wider in ambit than the inquiry contemplated under the proviso to Section 24(1)(a) of the Provincial Insolvency Act, 1920. His second submission was that even otherwise there was no evidence whatever to show that the debtor had suppressed assets which would be worth more than the value of the debts which were due and payableby him.

8. Mr. Venkataraman, learned Counsel for respondents 1 to 3,however, submitted that there was no error of jurisdiction which was discernible in the judgment of the Courts below. He further urged this Court sitting in revision under the first proviso to Section 75(1) of the Act could not interfere with the findings arrived at by the Courts below merely on the score that the findings cannot be supported by the evidence on record.

9. Learned Counsel on both sides, cited copiously precedents from reported cases shall mention only a few of them for the limited purpose of the present petition. But before proceeding to refer to the case law, I may observe that under the Provincial Insolvency Act, 1920 the right of a debtor to present an insolvency petition has been laid down in terms which do not in my judgment, leave any doubt whatever to any one seeking to construe the provisions. Section 10 (1) of the Act provides that a debtor shall not be entitled to present an insolvency petition, unless he is unable to pay his debts, and one or other of three conditions is also present as set out in clauses (a) to (c) in that Sub-section. Clause (a) refers to 'the petitioner's debts amounting to five hundred rupees; Clause (b) refers to the circumstance that the petitioner is under arrest or imprisonment in execution of the decree of any Court for the payment of money; and Clause (c) refers to the subsisting attachment of some properties of his in execution of a money decree against him. It would have been noticed that the opening words of Section 10 of the Act which provide that a debtor shall not be entitled to present an insolvency petition, unless he is unable to pay his debts, not only lay down clearly the condition under which he can present a petition, but by the same token also provide that the onus of proof of establishing inability to pay the debts is squarely on the petitioner himself. It is in this context that Section 10 of the Act has lo be read in conjunction with the proviso to Section 24(I)(a) of the Act. The latter Section lays down the procedure at hearing of the petition by the Court. Section 24(1) of the Act provides that on the day fixed for the hearing of the petition, or on any subsequent day to which the hearing may be adjourned' the Court shall require among other things, proof to the effect that the creditor or the debtor, as the case may be, is entitled to present the petition. The proviso to Section 24(1)(a) contains the nature and course of the inquiry at the hearing, as well as the limits of that inquiry. The proviso reads as follows:

Provided that, where the debtor is the petitioner, he shall, for the purpose of proving his inability to pay his debts, be required to furnish only such proof as to satisfy the Court that there are prima facie grounds for believing the same and the Court, if and when so satisfied shall not be bound to hear any further evidence thereon;

Pausing here for a moment, I may observe that the provisions of Section 10 of the Act read in conjunction with the proviso to Section 24(1)(a) may be said to steer a middle course in the matter of inquiry', into an insolvency petition. On the one, hand, the clear intendment of the' legislature is that the debtor cannot have] an order of adjudication for the mere asking. On the other hand, it is not within the contemplation of the Act that the Court should be engaged in a full-j fledged or all-out inquiry on the debtor's petition before rendering its finding, one! way or the other, whether the petition should be allowed or rejected. In between the two possible extremities of trial, what the Act provides for is the conduct of as prima facie inquiry so that the Court may, be satisfied that the debtor is unable to pay his debts. The proviso, in terms, rules out any insistence by the Court on the debtor furnishing any proof beyond that which can be regarded as prima facie proof. The proviso further provides, in a negative fashion, that the Court shall not be bound to hear any further evidence if it is satisfied that there are prima facie grounds for believing the evidence of the petitioner.

10. Mr. Venkataraman, learned Counsel for the respondents, relied on Section 24(2) of the Act which empowers the Court not only to examine the debtor, when he is present as to his conduct, dealings and property in the presence of such creditors as appear at the hearing, but also provides that the creditors 'shall have the right to question the debtor thereon.' Learned Counsel urged that a provision such as Section 24(2) in the Act is a clear indication of the rights of the creditors to cross-examine the debtor when he is examined by the Court on the petition filed by him. Learned Counsel submitted that in the present case both the learned District Munsif and the learned District Judge in appeal had not exceeded the bounds of the inquiry under Section 24 of the Act when they took note of the answers elicited from the debtors in the course of his cross-examination by the respondents. In these circumstances, he submitted that the inquiry conducted by the trial Court as well as by the learned District Judge in appeal cannot be regarded as being in excess of their jurisdiction.

11. Learned Counsel for the petitioner however, pointed out that in so far as the trial Court allowed the respondents to question the debtor as respects the assets covered by Exhibits B-1 and B-2, the scope of the inquiry had been enlarged beyond the ambit provided thereon by the proviso to Section 24(1)(a). Learned Counsel for the petitioner cited two early dicisions of this Court. The one reported as Narayanappa v. Bheemappa : AIR1926Mad494 is a ruling of a decision Bench consisting of Devadoss and Waller, JJ., In that case, in the petition filed by the debtor for adjudicating him as an insolvent, he had stated that his properties were worth only Rs. 10,000 whereas his debts were Rs. 25,000 and odd. He further stated that he was unable to meet his liabilities. The petition was dismissed by the trial Court. In the revision brought before it, the Division Bench observed that when a person presents a petition to be adjudicated as insolvent, that petition itself is treated as an act of bankruptcy under Insolvency law and when he says that his liabilities are more than his assets, that must be taken as some evidence that he is unable to meet his debts. After referring to the provisions of Section 24 of the Provincial Insolvency Act, the Division Bench observed that in that case the Court below had taken evidence to consider whether some of the debts mentioned in the petition were real debts. According to the Division Bench, such an inquiry should not be held for the purpose of considering whether tie application of the petitioner should be granted or not.

12. In Srirangachariar v. Narasimha Iyer AIR1928 Mad1193 the abovesaid decision was referred to by Devadoss, J., who constituted the division Bench in that case along with Waller, J. In this case, a petition by a debtor under Section 10 of the Act was opposed by the creditors on the ground that he was in possession of large extent of properties and that he had suppressed their existence. This plea was accepted by the Insolvency Court and the petition was dismissed. On revision, Devadoss, J. observed that the proof that is required under the proviso of Section 24(a) of the Act was only prima facie proof and that the mere fact that the debtor had large properties, can be no ground for holding that he was able to pay his debts. One of the contentions which was accepted by the Court below in that case was that the petitioners had suppressed their assets. Dealing with that aspect, the learned Judge observed that this was not germane to the enquiry which a Court ought to hold under Section 24 of the Act. The learned Judge further observed that the fact that the petitioners had not brought to the notice of the Court all the properties was no ground for holding that he was able to pay his debts. Even otherwise, it was observed that in an enquiry under Section 24, a Court is not entitled to consider whether the debtor has committed acts which would make him liable under the penal provisions of the Insolvency Act.

13. The later decisions of this Court only tend to re-emphasise the limited scope of the inquiry under the proviso to Section 24(1). Learned Counsel for the petitioner cited three of them, all decided by Ramaprasada Rao, J. (as he then was), in Mohanakrishnan v. Gopalawami Naidu : (1969)2MLJ140 Karmagam v. Jayaseelan Chettiar : AIR1977Mad250 and Lingasami Gaunder v. S.K. Subramaniar (1917) 44 I.A. 11 : 32 M.L.J. 1 A.I.R. 1916 P.C. 64.

14. Reference was also made in the course of argument to an earlier decision of the Privy Counsil reported in Chatrapat Singh Dugar v. Khwrag Singh (1917) 44 I.A. 11 : 32 M.L.J. 1 : A.I.R. 1916 P.C. 64. That case, however, arose under the earlier provincial Insolvency Act, 1907 which the Provincial Insolvency Act, 1920 repealed. It may be observed that in the Provincial Insolvency Act, 1907. the provisions which correspond to the present Section 10 of the Provincial Insolvency Act, 1920, were differently couched. Besides, the scope of the enquiry with a debtor's petition which are now clearly provided for under the proviso to Section 24(1)(a) were not in terms enacted in the earlier Act. Subject to these distinctions, however, subsequent decisions of Courts have referred to the Privy Council decision as laying down the proper approach of the Courts to a petition filed by a debtor for adjudicating himself as an insolvent. I shall have occasion to refer to this Privy Council ruling a little later while discussing another aspect of this case.

15. The sum and substance of the case law on the subject, however, reiterates what is made clear by the very terms of the proviso to Section 24(1)(a). As I have already observed, the Court should not embark on an elaborate trial procedure for the purpose of deciding the correctness or the probative value of the petition filed by the debtor for adjudicating himself as insolvent. Hence, if the Court exceeds the bounds of this limited prima facie, inquiry, then it would be committing an excess of jurisdiction and its order is liable to be set aside on that ground.

16 In the present case, I am prepared to accept the contention of Mr.Venkatraman, learned Counsel for the the respondents, that the Insolvency Court was well within its rights in allowing the respondents to cross-examine the debtor after he was examined in Chief, but the introduction, at the stage of cross-examinat on by the respondents, of documentary evidence, does in my judgment, enlarge the scope of the enquiry beyond the legitimate bounds of Section 24 proviso. It may be observed that though Sub-section (2) of Section 24 requires the debtor to be examined by the Court and it also confers a right on the creditors to question the debtor, independent testimony from the side of the creditors, at that stage, has got to be completely eschewed This is because the proviso very clearly says that the Court shall not be bound to hear any further evidence beyond requiring the petitioner to furnish such proof as to satisfy the Court that there are prima facie grounds far believing the contention of the petitioner. To the extent, therefore, that the Courts below had allowed the respondents to introduce documentary evidence, which carried the matter beyond the bounds of prima facie proof, even if it is be in the context of their cross examination of the petitioner, to that extent in any judgment, the inquiry had exceeded the limits set for it by the proviso to Section 24(1)(a) of the Act.

17. Even on the footing that 45 cents of property in Thenbagam village really belonged to the petitioner on the basis of Exhibits B-1 and B-2, there was nothing to show that the property continued to remain in the hands of the debtor especially when in answer to a question in cross-examination, the debtor had categorically stated that the Government had resumed the said land. Quite apart from the unsatisfactory nature of the evidence regarding the existence of this item of property as part of the assets of (he petitioner, there is also the question of its value. While the respondents had asserted in the counter affidavit which they had filed before the Court below that 45 cents of property in that village were worth Rs. 5,000 there was no evidence whatever on record of the said value No attempt was made by the respondents, even in their cross-examination of the petitioner, to suggest what the value of the property was or that the value was Rs. 5,000. While the learned District Judge seemed quite sure about the value of the property being Rs. 5,000 there is absolutely no evidence whatever to show that this property was worth Rs. 5,000. There was only an assertion by the respondents in their counter affidavit about this figure. Hence even on the state of the evidence on record, the Courts below were not justified in coming to the conclusion that the assets possessed by the debtor were in excess of his liability;

18. Learned Counsel for the petitioner also submitted that the ground upon which the learned District Judge rejected the petition in confirming the order of dismissal of the trial court, namely, that this was an abuse of the process of Court, introduces an alien element into the discussion. He cited the observations of the Privy Council in the case which he had earlier referred to. In the case before the Privy Council also, it was contended on behalf of the creditors that the debtor's petition was an abuse of the process of Court. In dealing with that contention, the Privy Council observed as follows:

What was held was that the application was an abuse of the process of the Court and so must be dismissed... It is to be regretted that the Courts in India allowed themselves to be influenced by this plea, instead of being guided to their decision by the provisions of the Act. In clear and distinct terms the Act entitles a debtor to an order of adjudication when its conditions are satisfied. This does not depend on the Court's discretion but is a statutory right; and a debtor who brings himself properly within the terms of the Act is not to be deprived of that right on so treacherous a ground of decision as an 'abuse of the process of the Court'. This case illustrates the of peril of this dectrine in India, for what has been treated by the Courts below as such an abuse appears to their Lordships in no way to merit this censure.

I had earlier pointed out that the main ground on which the learned District Judge confirmed the order of dismissal passed by the District Munsif of the debtor's petition in this case was that the suppression by the debtor of the land of the extent of 45 cents was an 'abuse of process of Court.' Following the Privy Council's decision, I am disposed to hold that what is regarded an abuse of the Court process has no relevance to the inquiry which the Court has to hold. Even otherwise, on the basis of the decision of Devadoss, J.; in Srirangachariars case A.I.R. 1928 Mad. 1193 the mere suppression, even if there had been a suppression of that property, cannot be a ground for rejecting the petition filed by the debtor under Section 10 of the Act. In this case, I have earlier referred to that part of the evidence of the debtor relating to the existence of this item of property and I had observed that there was no acceptable evidence to show that the property is still in the hands of the petitioner.

19. Mr. Venkataraman, for the crerditors reminded me about fthe limited jurisdiction of ibis Court setting in revision under Section 75(2) of the Act. In that connection, he cited a decision of the Supreme Court reported in Malini Ayyappa Naicker (dead) by his legal representative v. Seth Manghraj Udhavadas firm : [1969]3SCR698 Dealing with the scope of the High Court's jurisdiction under this Section, the Supreme Court observed that the 1st Iproviso to Section 75 of the Act provided that the High Court for the purpose of satisfying itself that an order made in any appeal decidec by the District Court was according to law may call for the case and pass such order with respect there to as it thinks fit. Elaborating the theme of this proviso, the Supreme Court held that the legislature did not confer on the High Court, an appellate power, nor did it confer on it a jurisdiction to reappre-ciate the evidence on record. The Supreme Court lurther held that while exercising that power the High Court is, by and large, bound by the findings of fact reached by the District Court, and even if there had been a wrong decision on facts that decision must be regarded as one according to law so long as it has been rendered by a competent Court. The Supreme Court discouraged any re-examination of the findings of fact of the Courts below by the High Court exercising its revisional jurisdiction under the 1st proviso of Section 75 of the Act.

20. In my view, the caution uttered by Mr. Venkataraman, based on the proviso to Section 75(1) of the Act might have been saved in the present case. My purpose in referring to the evidence in some detail was not to reappreciate it or to draw my own inferences therefrom, but to show in what manner admission of such evidence was based on a misconception of the jurisdiction of the Court, having regard to the scope of the enquiry laid down by the proviso to Section 24(1)(a) of the Act. I have earlier observed not merely with reference to decided csses on the subject, that the enquiry which had been gone into by the Courts below falls outside their jurisdiction. I am satisfied that the petitioner in this case must succeed in this revision petition on that point. The revision petition is accordingly allowed. The orders of the Courts below are set aside and the Insolvency Petition No. 9 of 1974 is allowed. There wilt, however, be no orders as to costs.


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