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Mohanakrishnan Vs. Gopalaswami Naidu and ors. - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtChennai High Court
Decided On
Reported in(1969)2MLJ140
AppellantMohanakrishnan
RespondentGopalaswami Naidu and ors.
Cases ReferredChhatrapat Singh Dugar v. Kharag Singh Lachmiran I.L.R.
Excerpt:
- .....provides for the contingencies, circumstances and the data under which persons can resort to such insolvency courts for relief. such relief could be sought by the debtors on their own volition and by the creditors if they choose to do so. an act of insolvency which is defined in section 6 of the act includes a petition by a debtor to be adjudged an insolvent under the provisions of this act. it therefore follows that if a person voluntarily wishes to be adjudicated an insolvent and petitions for that purpose under the act that act by itself is an act of insolvency. section 10 deals with the conditions on which a debtor may petition and in fact prescribes the limits of the jurisdiction of the court to consider and adjudicate upon the petitions by debtors who come to court voluntarily for.....
Judgment:

T. Ramaprasada Rao, J.

1. This Civil Revision Petition is directed against the order of the learned District Judge, Tirunelveli, in C.M.A. No. 27 of 1965. The petitioner herein was adjudicated an insolvent on his own petition. At or about the time when the insolvency proceedings were initiated by the petitioner, he has executed a promissory note for Rs. 7,000 in favour of the 1st respondent as evidenced by Exhibit A-2, dated 24th May, 1960. The petitioner, however, was canvassing the correctness of the said debt and this is seen from the correspondence that passed between the petitioner and the 1st respondent prior to the petitioner filing his application for adjudication. In fact, the petitioner filed his petition for adjudication on 25th July, 1963 and disclosed therein five debts two of which are decree debts and three others are debts accruing under promissory notes in favour of other parties. The 1st respondent thereafter instituted a suit on the foot of Exhibit A-2 on 8th October, 1963. The petitioner, who was the defendant in that suit, filed his written statement and inter alia in paragraph 6 of the same the petitioner states.

This defendant was unable to discharge the debts incurred by him and he has since filed an insolvency petition in I.P. No. 14 of 1963 on the file of this Court and the same is pending. As the plaintiff is not a creditor of this defendant, he has not been included as a respondent in the said insolvency petition.

2. On 6th February, 1964, the petitioner was adjudicated an insolvent and on 29th February, 1964, the 1st respondent obtained a decree against the petitioner in the suit filed by him against the petitioner. After securing a decree as aforesaid, the 1st respondent filed an application under Section 35 of the Provincial Insolvency Act, for annulling the adjudication order passed by Court in I.P. No. 14 of 1963, which was a petition filed by the petitioner on his own volition for his adjudication. This application for annulment was enquired into and the Courts below found that the debtor had not established that he was unable to pay his debts that his conduct was dishonest in that he had secreted the properties of his before applying for adjudication and that the petitioner ought to have paid the decree debts, which he disclosed in the insolvency petition filed by him. The petitioner aggrieved against the order of the Courts below has filed this revision petition canvassing the legality and propriety of the order of annulment of adjudication which is the cumulative result of the orders of the Court below.

3. Before considering the facts arising in the instant case it would be convenient to notice the law which is applicable in such circumstances. The Provincial Insolvency Act is a self-contained enactment consolidating the law relating to insolvency and provides for the contingencies, circumstances and the data under which persons can resort to such insolvency Courts for relief. Such relief could be sought by the debtors on their own volition and by the creditors if they choose to do so. An act of insolvency which is defined in Section 6 of the Act includes a petition by a debtor to be adjudged an insolvent under the provisions of this Act. It therefore follows that if a person voluntarily wishes to be adjudicated an insolvent and petitions for that purpose under the Act that act by itself is an act of insolvency. Section 10 deals with the conditions on which a debtor may petition and in fact prescribes the limits of the jurisdiction of the Court to consider and adjudicate upon the petitions by debtors who come to Court voluntarily for being adjudicated as insolvents. Section 10 provided that a debtor shall not be entitled to present an insolvency petition unless he is unable to pay his debts and his debts amount to five hundred rupees.... We are not here concerned with the other provisions in Section 10. Section 13 which prescribes the contents of a petition for adjudication provides as follows:

13 (1) Every insolvency petition presented by a debtor shall contain the following particulars namely....(d) the amount and particulars of all pecuniary claims against him....

4. Section 35 vests the power in Court to annul orders of adjudication provided in the opinion of the Court a debtor ought not to have been adjudged an insolvent. While interpreting therefore Sections 10, 13 and 35 of the Provincial Insolvency Act, or for the matter of that the relevant provisions of the Presidency Towns Insolvency Act, the Courts ought not to transcend the legitimate limits set by the language and content of those sections and be carried away by the unmeritorious conduct of the debtor or the dishonest attitude of his to wink at his creditors and put them into a deliberate loss. Abuse of process of law of Court is a perilous doctrine which can be grappled with when the debtor seeking adjudication intends to circumvent the provisions of law, particularly the statute law relating to bankruptcy and attempts to persuade the insolvency Court for a favour when he is not statutorily entitled to it. The abuse should relate to the process designed and indicated in the provisions of the Insolvency Act. When once he : satisfies the prescribed conditions which the Legislature has set as a sine quo non enabling him to get himself adjudicated an insolvent, the Court has no option except to consider his request and grant the prayer, the other requirements being satisfied. This is a statutory right to which the debtor is entitled. In such circumstances, judicial discretion is not infinitely elastic but circumscribed by well seasoned provisions made by the Legislature. On the only ground that the conscience of the Court is not satisfied the petition for adjudication ought not to be refused on a priori reasoning if the petitioning debtor satisfies the provisions of law.

5. In the instant case the petitioner satisfied at any rate, the Insolvency Court that he was unable to pay his debts and that his debts amounted to Rs. 500 and more. It is not in dispute that the petitioner disclosed in any event two decree debts which he was bound to pay and those debts by themselves exceeded Rs. 500. The conditions of Section 10 (1) (a) of the Provincial Insolvency Act is therefore satisfied. The petitioner was examined and he was confronted with a settlement deed Exhibit B-4 dated 10 th June, 1959, wherein he purports to settle his properties (his undivided share in the joint family properties) in favour of his wife. He satisfied the insolvency Court that such settlement did not have a bearing or relevancy to the conditions prescribed by Section 10 and he was therefore rightly adjudicated an insolvent. The Courts below however entered into a more detailed discussion which in my opinion is not at all relevant to the issue and found without satisfactory and clinching evidence that the settlement deed executed in favour of his kith and kin was an indicia of fraud against the Creditors and was also proof of the fact that he was still able to pay his debts. I am unable to follow the reasoning and much less agree with the conclusions of the Courts below. As I said earlier the law of insolvency being specially iron-jacketed within the provisions set for the purpose, by the Legislature, no one can speculate and fence on the issue to arrive at a conclusion. Under Section 6 of the Act, even the presentation of a petition for adjudication is an act of insolvency. Besides, the petitioner has satisfied that he has to pay two decree debts which exceed Rs. 500. In my view he has satisfied the condition prescribed by the statute. One is tempted to refer to a very classical passage of Reilly, J., in Alamelumangathayarammal v. Balasami : AIR1928Mad394 .

To my mind we ought to be very careful in interpreting those words (section 21 of the Presidency Towns Insolvency Act).... I do not think that there is any moral flavour about them or that we can say within the meaning of the section that a person ought not to have been adjudged insolvent on the ground that his conduct has been dishonourable or dishonest or fraudulent or that he is a scoundrel who does not deserve the assistance of the Court. I find it very difficult to believe that words so lacking in precision in their general meaning could have been introduced into the Act unless we are to read them solely with reference to their context with reference to the provisions of the Act, in which case their meaning becomes, I think, reasonably clear and precise.

6. The learned Judge went on to say that,

If a petitioning debtor has not fulfilled any of the conditions required by the Act, to enable him to present a petition, then it is clear that he ought not to have been adjudged insolvent. If his application or his adjudication defeats some provision of the Act or some order properly made under the provisions of the Act, then again we can say that he ought not to have been adjudged an insolvent.

It is not the case here at all. Natesan, J., in similar circumstances and dealing with Section 10 of the Provincial Insolvency Act expressed in uncanny terms in Krishnappa Chetti v. Kasiviswanatha Chettiar (1966) 1 M.L.J. 210, that if the conditions specified in the section are complied with the debtor is entitled to an order of adjudication.

7. Mr. Kumaraswami, learned Counsel for the first respondent, however, states that there has been a suppression in that the petitioner did not disclose in the petition the debt which by then he was owing to the first respondent. This argument however overlooks the fact that it is obligatory on the part of the person filing a petition for adjudication to mention the amount and particulars of all pecuniary claims against him. The expression 'particulars of all pecuniary claims ' appearing in Section 13 (1) (d) is very significant. Such claims should be subsisting and not disputed and practically be admitted. 'Otherwise if the argument of Mr. Kumaraswami were to be accepted, then all claims which are disputed also should find a place in the insolvency petition which is not either the letter or the spirit of the subsection. He next contends that the finding of the Courts below that the petitioner is a man of means ought not to be disturbed. I am afraid that the finding, if it was to be treated as a finding of fact at all, was drawn from the imagination of the Courts below rather than on any acceptable evidence or material. The only solitary fact which prompted the Courts below to find that the petitioner did have the means to pay is that the settlement deed executed years before he filed the petition for adjudication was a sham and nominal transaction and was intended to be a prospective fraud against the creditors. This argument is far fetched and the finding is equally far fetched. If it is intended in fraud of creditors, the first respondent is not without a remedy. He can at the appropriate time and before an order of discharge is secured by the insolvent, set right matters and obtain relief by setting the law in motion.

8. One other argument of learned Counsel for the first respondent is that the petitioner did not include the name of the first respondent in the list of creditors disclosed in the petition. This again is closely allied with the prior argument which is now referred to. The petitioner was always disputing the liability of his to the first respondent and it is in the fitness of things that he omitted to mention the name of the first respondent in the petition for adjudication.

9. Again it is surprising that the Courts below should characterise the creditors disclosed by the petitioner as bogus creditors. Much more reliable evidence is required to come to such a decisive conclusion. In any event, two of the creditors are decree-holders and it is impossible to conceive that the said two creditors who have obtained decrees against the petitioner and which have become final can, by any stretch of imagination, be said to be bogus creditors.

10. The Courts below apparently were struck and attracted by the dangerous doctrine of ' abuse of process of Court.' The peril involved in adopting such a doctrine has been very well characterised by the Judicial Committee in Chhatrapat Singh Dugar v. Kharag Singh Lachmiran I.L.R. (1917) Cal. 535 : L.R. 44 IndAp 1 : (1917) 32 M.L.J. I:

This case illustrates the peril of this doctrine 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. It may perhaps, give rise to a contest for priority between competing creditors, but that will be, if necessary a matter for decision hereafter in the course of the insolvency. Be that, however, as it may, their Lordships are now concerned only with the debtor's position; and as to that they are satisfied that he has complied with all the conditions specified in the Act and is entitled as of right to an order adjudicating him an insolvent. This conclusion, apart from the decision under appeal, is in agreement with the current of authority in India, where it has been rightly held that the stage at which to visit with its due consequences any misconduct of a debtor is when his application for discharge comes before the Court and not on the initial proceeding.

11. This statement of law is clear enough to find that the lower Courts exceeded in their jurisdiction in extending the arms of discretion to an unlimited extent and finding without any satisfactory data for the same, that the petitioner is a person who is able to pay his debts and the process of Court has been abused.

12. I set aside the order of the Court below and allow the Civil Revision Petition with costs.


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