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K. Venkataramanasetty and Sons Vs. Malali Venkataramanaiya Setty and ors. - Court Judgment

LegalCrystal Citation
CourtKarnataka High Court
Decided On
Case NumberMisc. First Appeal No. 282 of 1976
ActsProvincial Insolvency Act, 1920 - Sections 6
AppellantK. Venkataramanasetty and Sons
RespondentMalali Venkataramanaiya Setty and ors.
Appellant AdvocateL.S. Seshagiri Rao, Adv.
Respondent AdvocateA.J. Gunjal and ;P. Ramachandra Rao, Advs.
Cases ReferredNazir Mohammed Khan v. Murthuza and Sons
.....of the properties mentioned under the will, she could not have bequeathed the entire extent of the properties in favour of the 5th defendant under the will. there is no dispute that upon the death of s, defendant no.1 being the widow was entitled to succeed to the properties of her husband along with her sons and daughter. therefore, she succeeded to 1/6th share in the properties left behind by her husband. the question is as to whether she could bequeath her undivided 1/6th share in the plaint schedule properties under a will? section 30 of the hindu succession act, no doubt, empowers an hindu to dispose of the properties by will or other testamentary disposition of any property, which is capable of being so disposed of by him or by her in accordance with the provisions of..........debtors. he has also deposed that the instalments were defaulted. that being so, the subsequent sale in favour of the creditor bank by the court would be relevant and admissible to do substantial justice between the parties and to pronounce judgment in the case. hence the additional document namely the sale proceedings is admitted into evidence. it i& now marked as exhibit no. p-6 on behalf of the petitioner (appellant).5. the learned counsel appearing for the appellants strenuously urged before us that the lower court was mainly guided by the fact that the valuation of the mill was given at rs.5,00,000/- and the lower court naturally took the view that that being so the entire debts of the firm could be wiped off with the assets and in that view the trial court proceeded to dismiss.....

G.N. Sabhahit, J.

1. This appeal by third petitioner is directed against the judgment and order dated 14th Nov., 1975 made by the District Judge, Chickmagalur in Insolvency Case No. 1 of 1972 on his file dismissing the petition of the creditors/petitioners for adjudging the debtors as insolvents.

2. The petitioners averred that The respondents 1 (a) to 1 (d) formed a joint family firm and that they being indebted to the petitioners and sonic of the respondents in the petition alienated their properties mentioned in the petitioner in favour of some of the creditors, in preference of those creditors, and with a view to defraud or delay the payments of the other creditors including the petitioners. They further averred that substantial portion of the properties belonging to the firm was sold and there was not much left with the respondents-debtors. The same was denied by respondent-debtors. During hearing, P. Ws. 1 to 4 were examined on behalf of petitioners. P. W. 1-second petitioner, Dhanaraj S. Jain, who is the elder brother of the first-petitioner has stated inter alia that they have advanced a sum of Rs.10,000/- and Rs.5,000/- respectively in favour of Malali Venkataramana Setty and Sons under promissory notes. They have produced the promissory notes. He has also stated that after the death of their father, the present respondents have constituted themselves into the joint family firm under the name and style of 'MALALI VENKATARAMANA SETTY AND SONS' and they have started running the business under the name and style of 'MYLARAGUPTA'. He has further deposed that the respondents creditors have sold on 23-6-1972 under Exhibit P-1 some properties in favour of respondent 4. He has further stated that they have sold properties in favour of respondent 5 as per Exhibit P-2 dated 23-64972. They have also sold their residential house in favour of respondent 6 as per the original of Exhibit P-3 on 23-6-1972. They have further sold Ambassador Car No. MYC-1165 and a lorry belonging to them bearing No. MYS-3726 within a few days thereof.

3. He has further deposed that the Oil Mill with building and godown is mortgaged in favour of the Vijaya Bank and that the Vijaya Bank has advanced them a sum of Rs.1,50,000. He has also deposed that a suit was filed for recovery of rent against them in Original Suit No. 126 of 1973 on the file of the Munsiff, Kadur. The Plaint and the written statement in the suit arc produced at Exhibits P4 and P-5. Thus, he has deposed that the respondents within a short time before the filing of the petition have disposed of substantial portion of the properties obviously wit intent to defraud or delay the payment in favour of the creditors.

P. W. 2 B. L. Ranganna was the Shanubhogue at Kadur for 20 years or more. He knew first-respondent, late Malali Venkataramanaiah Setty, in the petition. He has spoken to the fact that in the year 1972 a shop by concerned respondents was run under the name and style 'MALALI VENKATARAMANAIAH SETTY & SONS' and subsequently the name is changed as 'MALARAGUPTA'. He has also deposed That the Oil Mill was closed in about the year 1972.

P. W. 3 is Gopalakrishna. He is also on the point that the name of the shop has been changed. P. W. 4 is K. V. Adinarayana Shetty. He was originally the 3rd respondent in the petition and subsequently he has been transposed as petitioner. He has spoken to the petition averments. He has stated that he had to file O. S. 24 of 1972 for, the recovery of his dues. He has produced the certified copies of the plaint, written statement and other documents at Exhibits P4, P-7, P-8, P-9 and P-10. He has further do posed to the, sales made by the concerned respondents. He has also spoken to the mortgage in favour of Vijaya Bank. According to him, the alienations were made with a view to defraud or delay payment to the creditors. As against this, respondents have, examined R. Ws. 1 to 4. R. W. I is Revanaiah. He speaks to the shop run by the concerned respondents. According to him one of the brothers is looking after the shop. Shop is running. R. W. 2 is Bhagyalakshml. She has stated that she is the daughter of Malah Venkataxamana Shetty who died prior. to her deposition, on 5-9-1975. She has purchased a house from her brothers after the death of her father. The sale deed is at Exhibit R-1. The consideration is Rs.2,000/-. The sale deed is dated 23-6-1972. R. W. 3 is M. V. Parathasarthy. He speaks to the facts as to when the partnership was established. The firm Malali Venkataramana Shetty and Sons was established in the year 1961, under the Partnership Act. Exhibit R-2 is the acknowledgment of registration of the partnership firm. Respondents I (a) to I (d) are the partners of the firm. He states that the assets of the partnership firm are the building in which the oil mill is housed and six sites shop And godown. Apart from the mill there are the stocks in the shop. He has further stated that item No. 8 did not belong to the i3artnership firm. Item No. 9 also did not belong to the joint family firm. Similarly item No. 5 did not belong either to the firm or to the joint family. He denies that the management of the shop was changed. R. W. 4 K. Yalahanka Rai, is the Manager of Vijaya Bank, Birur. He ban deposed that the Bank advanced to the extent of Rs.1,75,000/-, Rs.60,000/- and Rupees 19,000/- to the firm known as Malali Venkataramana Shetty at Kadur on the Hypothecation of the mill building with the Oil Mill machinery along with the 5 sites. For Rs.60,000/- loan they have pledged the L. 1. C. policy apart from the security referred to Above. He has further deposed that pigmi deposit of Rs.50,000/- has been made over in favour of the Bank. He has also deposed that the loans an still , substing even after the adjustments.-- The Bank was obliged to file suits with reference to the mortgage in O. S. No. 5 of 1974 before the Civil Judge, Chickmagalur and they obtained the decree as per Ex. R-18. Even after the decree they were unable to pay. They paid only one, instalment and that was due in March 1975 and thereafter they did not pay anything. The execution was taken out. The learned District Judge appreciating the evidence on record came, to the. conclusion that the properties that were left with the concerned respondent namely respondents 1 (a) to I (d) were sufficient to discharge all the debts of the debtors and as such it could not be said that the firm committed acts of insolvents under Section 6(1)(a) and in that view he dismissed the petition Of the creditors for adjudging respondents 1 (a) to 1 (d) as insolvents. Aggrieved by the said judgment and order, the third petitioner has instituted the present appeal.

4. The learned Advocate appearing for the Appellant has filled an application on I. A. No. 11 praying for admitting into evidence the sale proceedings conducted in execution filed by the Bank. The other side no doubt objected to admit the additional evidence. It is seen, however, that the sale is subsequent event, it is after the judgment of trial Court was pronounced in 1975. sale is in the year 1978. In fact R. W. 4 in his evidence has stated that the Bank had taken out execution proceedings against the firm all the debtors. He has also deposed that the instalments were defaulted. That being so, the subsequent sale in favour of the creditor bank by the Court would be relevant and admissible to do substantial justice between the parties and to pronounce judgment in the case. Hence the additional document namely the sale proceedings is admitted into evidence. It i& now marked as Exhibit No. P-6 on behalf of the petitioner (appellant).

5. The learned Counsel appearing for the appellants strenuously urged before us that the lower Court was mainly guided by the fact that the valuation of the Mill was given at Rs.5,00,000/- and the lower Court naturally took the view that that being so the entire debts of the firm could be wiped off with the Assets and in that view the trial Court proceeded to dismiss the application of the creditors to adjudge the partners as insolvent. But he invited our attention to the fact that the entire Mill was sold In favour of the Bank itself in Court auction for Rs.1,05,000/- and the Bank dues were not fully satisfied. That took away according to him the very basis of the reasoning's of the lower Court and hence he submitted that the appeal was entitled to succeed. As against that, the learned Counsel appearing for the debtors-partners submitted that they have made an application for setting aside the sale and that they wag hopeful of getting the sales set aside. He maintained that the sale price would be not less than Rupees 3,06,000/- with which the partners would be able to discharge all the debts.

6. The sole point therefore that arises for out consideration in this appeal is whether the lower Court was justified in observing that the debtors could satisfy the debts of all the creditors with the properties namely the Mill and its accessories as they could be valued at Rs.5,00,000/-.

7. The Exhibit P-6 is the sale proceedings; that clearly shows that the sale of the Mill was effected in favour of the creditors Bank for Rs.1,05,000/-. It says, that the decree holder purchased the properties as per the sale warrant, he being the highest bidder. That sets at rest the controversy with regard to the valuation of the Mill which was estimated to be worth Rupees 5,00,000/- by the debtors. Now it is made very clear that the Mill and the accessories are not even able to satisfy the debts of the Bank itself which runs into Rs.31/2 lakhs. That being so, it is obvious that the lower Court was entirely in error in thinking that the Mill with its accessories were sufficient to satisfy all the debts of the creditors and the learned District Judge entirely cried in thinking that the, creditors under-valued the ,properties. In fact he went to the extent of criticising the Marwari Community which only exhibits that be has an inherent prejudice against the Marvaries. In this case, the learned District Judge has revealed consciously or unconsciously his bias against the Moyaries by observing in the course of the judgment thus:

'Merely because there is any unsecured debt they cannot be allowed to ride rough shod on the debtor to suit their whims and fancies, the reputation of the Marvaries being at a discount as is the common knowledge. That only perhaps with their reputation the Government of late have taken stringent measures on the pawn brokers, 99 per cent of them being Marvaries'.

He has of course no sympathy for respondents 1 (a) to 1 (d) also they being Vyshayas. In the course of the next para he has remarked against that community also when he says:

'The less said the better as to this gross under-valuation of the properties by the 3rd respondent who also hails from the same community as the partners of the 4th respondent firm the respective stands taken by them, indicating diamond cutting diamond as was rightly urged by the other respondents'.

It is needless for us to point out that the Judicial Officers should try their best to contain their prejudices and predilections and should not allow them to prop up while deciding a case between the parties before them. Justice Holmes pointed out long ago that these inherent prejudices and predilections of a Judge are likely to prop up in the judicial process, describing them as the inarticulate major premises and cautioned the judges to exercise judicial self-restraint. In fact the Supreme Court of India in. S. P. Gupta v. Union of India. popularly known as the Judges case, reported in : [1982]2SCR365 , speaking through his Lordship Justice Venkataramaiah at para 1256 of the Judgment has observed:

'But if the judiciary should be really independent something more is necessary and that we have to seek in the Judge himself and not outside. A Judge should be independent of himself. A Judge is a human being who is a bundle of passions and prejudices, likes and dislikes, affection and recklessness. In order to be a successful Judge these elements should be curbed and kept under restraint and that is possible, only by education, training continued practice and cultivation of sense of humility and dedication to duty. These curbs can neither be bought in the market nor injected into human system by the written or unwritten laws. If these things are. there even if any of the protective measures provided by the Constitution and the laws go, the independence of the judiciary will not suffer. But with all these measures being there, still a Judge may not be independent: it is the inner strength of the Judges alone that can save the Judiciary. The life of a Judge does not really can for great acts of self sacrifice, but it does insist upon small acts of self-denial almost every day.'

We are stating all these because the prejudices of the Judge against Marvaries have obviously informed his decision, on the facts of the present case.

8. The Court sale proceedings produced now in this appeal would clearly show that the creditors have not under-valued the properties as was thought by the learned District Judge. They have made the valuation properly. It is the District Judge who was in error in thinking that they under-valued the properties.

9. That being so, it is obvious that the debtors have sold substantial portion of the property and the deeds indicate that they have sold them practically on the same day. The intention of a party has to be, inferred and this move on their part to sell substantial portion of the properties in favour of some of the creditors and others would clearly go to show that their intention was to prefer some of the creditors and to defraud or to delay the payment to rest of the creditors. That being so, we are satisfied that they 'have committed an act of insolvency as contemplated under Section 6(b) of the Act which reads :

'(b) If, in India or elsewhere he makes a transfer of his property or any part thereof with intent to defraud or delay the payment, to creditors'

10. This Court explaining the same in Nazir Mohammed Khan v. Murthuza and Sons, (1967 (2) Mys LJ 196) has ruled that there is a difference between a transfer of all or substantially all the property, and a part of the property; in a case, where there has been a transfer of all or substantially all the property of a debtor, the law presumes that the debtor had the intention to defeat or delay his creditors, and if such a transfer is alleged and proved, the Court would be justified in declaring that the debtor has committed an act of insolvency.

11. On the facts of this case, the debtors have transferred substantially all the unencumbered properties including the residential house the car and the lorry. The intention is obvious, it is to delay if not defraud the creditors. Hence, we have no hesitation to hold that the respondents in the petition at 1 (a) to 1 (d) being the partners of the firm have committed an act of insolvency.

Accordingly the appeal is allowed on setting aside the impugned judgment and order of the lower Court and the, original respondents 1 (a) to 1 (d) are adjudged as insolvents.

12. Appeal allowed.

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