1. This appeal is from the order passed by the learned District Judge of Cuddapah dismissing I.P. No. 90 of 1936. This petition was filed by a oreditor named Alladu Nagiah against one Golla Narasimha Eeddi. The present appellant Mundla Gangi Eeddi was substituted as the petitioning oreditor in 1937. The learned District Judge has dismissed the petition on the ground that the case involves the decision of complicated questions of law and fact before it can be held that a subsisting relationship of creditor and debtor has been satisfactorily established. The debtor objected to adjudication at the instance of the present appellant, alleging that this creditor had agreed to a composition scheme which had been accepted by other creditors also. The appellant, as appears from the order of the learned Judge, did not file any counter affidavit to this statement and the agreement set up by the debtor was sent for examination to the Government Examiner of Questioned Documents. After that official expressed the opinion that the signature on the alleged agreement was the signature of the appellant, the appellant put in a statement in which he alleged that the signatures of the creditors in the alleged agreement had been obtained by fraud, and that he, even if his signature also were found to be genuine, would not be bound by it. It is the raising of these pleas that has caused the learned Judge to say that complicated questions of law and fact have to be gone into before it can be decided that the petitioner and the respondent stand to each other in the relation of creditor and debtor. The learned Judge has said that these questions ought to be decided in a regular suit and he has referred the petitioner to a regular suit and dismissed his petition.
2. Mr. Seshagiri Rao for the appellant has contended that in so doing the learned District Judge has acted wrongly. Mr. Seshagiri Rao argues that the sole question of importance to be decided by the insolvency Court in this case was whether the relation of creditor and debtor still existed between the petitioner and the respondent or not. He says that the insolvency Court has no right to say that it will not decide this question merely because difficult questions of law and fact arise. The learned District Judge has relied upon a decision of a single Judge of the Bombay High Court, : AIR1935Bom80 Gopikabai Mahadev v. Chapsi Purshottam. That was a case somewhat similar to this. The petitioning creditor was confronted with a receipt signed by herself. She was obliged to admit that she had passed a receipt to the debtor, but she alleged that it had been obtained from her by means of fraud and misrepresentation. The insolvency Court which was hearing the petition thought that these allegations on the part of the petitioning creditor ought to be inquired into, but the District Court on appeal held that it was not necessary for the insolvency Court to inquire into these questions and said that the receipt passed by the petitioner could not be impeached in insolvency proceedings. It was on second appeal that the matter came before the Bombay High Court. The learned Judge held that a second appeal did not, properly speaking, lie, but he observed that it was competent for the insolvency Court to refer the petitioning creditor to a regular suit on the facts of that case. At p. 169 the learned Judge is reported to have said:
Therefore, prima facie, not only is she not a creditor for an amount of Es. 800 but she is no creditor at all of the opponents on the date of the petition and if she replies in answer to the opponents' petition that the receipt was fraudulently obtained, it is for her to establish that allegation and if the insolvency Court thinks that the question is of such a nature as can be properly adjudicated upon by a civil Court in a regular suit, I do not think that the discretion of the insolvency Court to refer parties to a regular suit is taken away by any of the provisions cited above.
3. The provisions cited above were Sections 4, 9 and 21 of the Act. The learned Judge does not state the source of the discretion which, in his opinion, the insolvency Court has to refer parties to a regular suit. It is clear that no such discretion can be derived from Section 4, Provincial Insolvency Act. Section 4(3) authorises the Court in certain circumstances after the insolvency proceedings have been set on foot to order the sale of the debtor's interest in property without deciding the precise nature or extent of that interest. But there is nothing in this provision to warrant the statement that the insolvency Court can dismiss an insolvency petition on the ground that the questions raised in it are too difficult or complicated for the insolvency Court to decide.
4. Mr. Govindarajachari for the respondent has referred us to Section 25, Provincial Insolvency Act. In Sub-section (1) it is provided that, in the case of a petition presented by a creditor, where the Court is not satisfied with the proof of his right to present the petition or of the service on the debtor of notice of the order admitting the petition or of the alleged act of insolvency or is satisfied by the debtor that he is able to pay his debts or that for any other sufficient cause no order ought to be made, the Court shall dismiss the petition. Mr. Govindarajachari contends that the present case can be brought within the clause 'for any other sufficient cause no order ought to be made.' This contention I find myself unable to accept. It is provided in Section 18(6), Presidency Towns Insolvency Act, that, when the debtor appears in response to a creditor's petition and denies that he is indebted to the petitioner, the Court on taking security may, instead of dismissing the petition, stay the proceedings for such time as may be required for trial of the question relating to the debt. This means that the insolvency Court in the Presidency Town is not obliged to go into disputed questions of debt but can refer the creditor to the ordinary civil Court to get a decree for the amount which he claims postponing insolvency proceedings meanwhile. But this is a very different thing from saying that the insolvency Court, if it considers the question of the debt between the petitioner and the respondent to be difficult, can dismiss the creditor's petition. There is no provision in Section 13(6), Presidency Towns Insolvency Act, for dismissal of the petition. The only provision is for adjournment of the insolvency petition until the civil suit is tried. Moreover, in the present case the decision of the learned District Judge is not a decision that for some sufficient cause no order ought to be made; but it is a decision that the petitioning creditor must go to the civil Court to establish his case. It is obvious that the dismissal of the insolvency petition outright is wrong, because, even if the petitioning creditor goes to the civil Court and gets a decree against the respondent for the amount claimed, it will be by that time too late for him to bring any insolvency petition. The act of insolvency in this case is alleged to have been committed in 1986; and any insolvency petition based upon that Act of insolvency must be summarily rejected if filed hereafter.
5. I regret therefore I am unable to agree with the decision of the Bombay High Court referred to above. I find myself in agreement with the contention of Mr. Seshagiri Rao that the question which has arisen in this case between the petitioner and the respondent is a question expressly and explicitly for the decision of the insolvency Court. I do not see how the insolvency Court can have a discretion to refuse to decide this question and to refer the parties for the decision of it to a different tribunal. I would therefore allow this appeal and set aside the order of the District Court and direct that the insolvency petition be restored to file and disposed of according to law. The appellant, I think, should have the costs of the appeal from the respondent.
6. I agree.