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C. Muniswami Naidu Vs. S. Rangachari and anr. - Court Judgment

LegalCrystal Citation
SubjectBanking;Civil
CourtChennai
Decided On
Reported inAIR1937Mad961; 173Ind.Cas.689
AppellantC. Muniswami Naidu
RespondentS. Rangachari and anr.
Excerpt:
- - the appellant failed to pay the first instalment and on 15th august 1936 his creditor filed a fresh petition for adjudication. the learned judge was of the opinion that inasmuch as the appellant had agreed to treat the failure to pay an instalment as a suspension of payment within the meaning of section 9, presidency towns insolvency act, he was estopped from raising a contention to the contrary......in this decision.3. the law of estoppel does not operate and cannot operate to prevent the provisions of the presidency towns insolvency act having effect. it is an act of insolvency if a debtor gives notice to any of his creditors that he has suspended or that he is about to suspend payment of his debts, but it must be noticed that he is suspending the payment of his debts generally and not that he is suspending the payment of a particular debt. the fact that the insolvent and his creditor had agreed that default in payment of an instalment under the mortgage should be treated as an act of insolvency, does not make it incumbent upon the court to regard it as an act of insolvency. what the court has to consider is whether an act of insolvency, as defined by the act, has been.....
Judgment:

Leach, C.J.

1. In 1935 the appellant was indebted to one S. Rangachari in the sum of Rs. 317-12-0 (in respect of which a decree had been obtained against him) and a sum of over Rs. 2,000 due under a promissory note. In execution of the decree the creditor attached a house belonging to the appellant. The attachment continued for more than 21 days and this was made the basis of a petition filed in February 1936 in this Court asking that the appellant be adjudicated an insolvent. This petition was withdrawn in April of that year as the result of an arrangement made between the parties. It was agreed that the appellant should execute a mortgage in favour of Rangachari to secure his indebtedness to him and that the appellant should repay this indebtedness in the following instalments: Rs. 400 to be paid on or before 15th July 1936; Rs. 500 to be paid on or before 15th December 1936; and the balance in two equal instalments within a period of one year from 15th December 1936. It was also agreed that in case of default in the payment of any instalment, the creditor should be at liberty to take 'further' proceedings in insolvency. It was also provided in the document which was drawn up that:

The mortgagor shall not raise any objection thereto and this act of default itself will then be treated as an act of insolvency on the part of the mortgagor as amounting to a suspension of payment within the meaning of the Act.

2. It was on these terms that the petition for adjudication was dismissed. The appellant failed to pay the first instalment and on 15th August 1936 his creditor filed a fresh petition for adjudication. In this petition three acts of insolvency were alleged: (1) that the insolvent had suspended payment 'as per the terms of the said deed of 17th April 1936 and had thus committed an act of insolvency Under Section 9'; (2) that he had departed from his dwelling house with intent to delay his creditors; and (3) that he had secluded himself so as to deprive the creditors of the means of communicating with him. The learned Judge before whom the petition came ordered the adjudication of the appellant on the first ground and did not deal with the two other grounds. The learned Judge was of the opinion that inasmuch as the appellant had agreed to treat the failure to pay an instalment as a suspension of payment within the meaning of Section 9, Presidency Towns Insolvency Act, he was estopped from raising a contention to the contrary. With great respect, we are unable to concur in this decision.

3. The law of estoppel does not operate and cannot operate to prevent the provisions of the Presidency Towns Insolvency Act having effect. It is an act of insolvency if a debtor gives notice to any of his creditors that he has suspended or that he is about to suspend payment of his debts, but it must be noticed that he is suspending the payment of his debts generally and not that he is suspending the payment of a particular debt. The fact that the insolvent and his creditor had agreed that default in payment of an instalment under the mortgage should be treated as an act of insolvency, does not make it incumbent upon the Court to regard it as an act of insolvency. What the Court has to consider is whether an act of insolvency, as defined by the Act, has been committed; and in deciding the question it can only look at the provisions of the Act. In our opinion the agreement between the parties cannot be deemed to constitute the non-payment an act of insolvency. The appeal will therefore be allowed and the case remanded to the insolvency Court for investigation of the two other grounds alleged in the petition. We make no order as to costs.


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