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In Re: Bholanath Chatterjee and Ex Parte: Ratnakar Misra - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtKolkata High Court
Decided On
Case NumberInsolvency Matter No. 11 of 1967
Judge
Reported inAIR1968Cal521,72CWN35
ActsPresidency Towns Insolvency Act, 1909 - Section 9
AppellantIn Re: Bholanath Chatterjee and Ex Parte: Ratnakar Misra
Appellant AdvocateGupta, Adv.
Respondent AdvocateSen, Adv.
DispositionPetition dismissed
Cases ReferredCredit Society v. Dhondiram Navalchand
Excerpt:
- .....mr. sen learned counsel for the debtor, has submitted that this transfer of the debtor's business by itself cannot be considered as an act of insolvency. where a debtor has got a genuine debt and in satisfaction of this debt transfers his property, such transfer cannot be held as a transfer with intention to defeat the claim of the other creditors. he relied upon muthiah chetti v. palaniappa chetti air 1928 pc 139 and also arvi co-operative credit society v. dhondiram navalchand air 1940 bom 289 in support of his contention.4. on the second act of insolvency mr. sen has urged that his client resides at no. 1, station road, durgapur, and therefore he is not aware of any visit by the creditor to his previous residence at no. 82/2c, bidhan sarani calcutta. on the second.....
Judgment:
ORDER

S.A. Masud, J.

1. This is a creditor's application for an order of adjudication against the debtor, Bholanath Chatterjee. According to the creditor on or about 2nd September, 1966 he lent and advanced to the debtor for the purpose of the latter's business asum of Rs. 3,000 repayable 90 days after the said date with interest thereon at the rate of 6 per cent per annum. In support of the debt a copy of the hundi was annexed to the petition. The act of insolvency is set out in paragraph 10 of the creditor's petition. The first act of insolvency according to the creditor is that Bholanath Chatterjee has sold out his business 'Malay Grill' at premises No 82/2A. Bidhan Sarani Calcutta where he was carrying on business, and this transfer of the business is a transfer 'with intent to defeat and delay his creditors' within the meaning of S. 9(b) of Presidency Towns Insolvency Act, 1909; second act of insolvency is that on 6th May 1967, 10th May 1967, and 11th May 1967 the creditor tried to see the debtor, but on each occasion the debtor was alleged to have avoided him and was absenting himself from his residence, thus, attracting Section 9(d)(ii) and (iii) of the said Act by depriving him of the means of communicating with him. The debtor in his affidavit has admitted the execution of the hundi, but has stated that the said money was taken in connection with a business proposition in respect of film production. He has set out his case in his affidavit by giving a long story that there was an arrangement between him and the creditor that he would finance the production of certain films. It is also stated that with the money secured from the creditor he would be able to get a loan of Rs. 5 lakhs from the Government of India for production of a film known as 'Mastarda' The execution of the hundi has been admitted. By a letter dated 12th May 1967 Mr. S K. Guha, the solicitor of the creditor has written to the debtor at No 82/2A Bidhan Sarani, Calcutta-4, whereby the debtor was asked to pay the said sum of Rs. 3,000 in default of which a suit will be instituted against him. One Mr. S. N. Ghosh replied to the said letter of Mr. S. K. Guha on 23rd May 1967 where it is stated that an agreement took place in presence of one Dilip Mukherjee to the effect that the creditor would pay a sum of Rs. 25,000 towards the production of the said film, 'Mastarda' and that the said Hundi was executed in that connection. The said Dilip Mukherjee has not sworn any affidavit in support of the debtor's case. I am satisfied that on the affidavits, prima facie, the debt has been established.

2. The next point to be decided is whether an application under the Insolvency Act is a proper procedure by which the creditor could get relief. Mr Gupta, learned counsel for the creditor has submitted that the debtor had transferred his only asset, namely his business in 'Malay Grill' and this transfer was effected with the intention to defeat his creditors including his client. He has drawn ray attention to the following observation at page 109 in Mulla's 'The Law of Insolvency in India'. Second Edition:

'A transfer by a debtor of all or substantially all his property in consideration of a past debt, that is, a debt already incurred, whether made absolutely or by way of a security is an act of insolvency within the meaning of this clause, whatever the motive of the parties may have been, as such transfer has the effect of withdrawing all the debtor's property from the legal process which his creditors have a right to enforce against him.'

According to him this is an act of insolvency and as such the creditor has the lawful right to make this application. It appears to me from paragraph 11 of the affidavit of Bholanath Chatterjee that the said business of 'Malay Grill' was sold to repay the debtor's liability under a decree against him passed by this Hon'ble Court on the 9th August 1966 in Suit No. 2100 of 1965 (Om Finance Corporation v. Bholanath Chatterjee). This fact is not denied by the creditor in his affidavit-in-reply.

3. Mr. Sen Learned counsel for the debtor, has submitted that this transfer of the debtor's business by itself cannot be considered as an act of insolvency. Where a debtor has got a genuine debt and in satisfaction of this debt transfers his property, such transfer cannot be held as a transfer with intention to defeat the claim of the other creditors. He relied upon Muthiah Chetti v. Palaniappa Chetti AIR 1928 PC 139 and also Arvi Co-operative Credit Society v. Dhondiram Navalchand AIR 1940 Bom 289 in support of his contention.

4. On the second act of insolvency Mr. Sen has urged that his client resides at No. 1, Station Road, Durgapur, and therefore he is not aware of any visit by the creditor to his previous residence at No. 82/2C, Bidhan Sarani Calcutta. On the second act of insolvency it seems to me that the creditor's case cannot be relied upon. The creditor through his solicitor has written a letter on the 12th May 1967 to the debtor and there is not a whisper in the said letter that the creditor visited the debtor at No. 82/2C Bidhan Sarani, Calcutta on the 6th May 1967 10th May 1967 and 11th May 1967. Further I find that the debtor is personally present in the Court and therefore it is very difficult to believe the story that he is secluding himself to avoid the creditor.

5. With respect to the first act of insolvency it appears to me that the debtor's financial condition is not sound. A decree has already bet n passed against him by this Court and he has to sell his business 'Malay Grill', which was situated at an important Street, Bidhan Sarani Calcutta. Mr. Gupta's criticisms that in particulars of the decree have been set out in the affidavit and that the debtor has not disclosed any other asset have great force, but at the same time to my mind poverty cannot be considered as an indelible discomfiture or a crime, norit should be allowed to silence the rigours of law. Of course, under the Insolvency Act, if the debt and the act of insolvency arc proved the order of adjudication will ordinarily follow. But at the same time to my mind this is not a case where the order of adjudication should be made.

6. The hundi was executed on 2nd September 1966. The hundi became mature on the 2nd December, 1966. A notice demanding the payment of Rs. 3,000 was made by Mr. S. K. Guha the solicitor for the creditor on 12th May, 1967. In that notice there is not the slightest indication that an insolvency petition is going to be made against the debtor. It is quite true that very often if the notice is served against the debtor informing him about the insolvency proceedings, such notice might defeat its object But even then the fact is that according to the notice a suit is going to be filed if the payment is not made within 7 days; and vet without further reference Lo the debtor this application is made. This would show that the Insolvency Act has been taken recourse to, to put pressure on the debtor to make the payment. It is nowhere alleged that the debtor has got other properties and was trying to transfer the property mala fide to other persons nor it is stated in the petition that he has other creditors in the market it is true that the creditor has got a remedy both under the ordinary law of the land for getting hack his money by filing a suit and also by making an application under the Insolvency Act. But in my view on the facts of this case I am not satisfied that there is any act of insolvency so far as the debtor is concerned. The transfer of business which was alleged to have been made by the debtor to defeat the claim ot the creditor does not appear to be a mala fide one. Where a voluntary transfer is made when the other creditors remain unpaid, it may be argued that the object of transfer is to defeat the claim of the latter in the instant case I find that a decree has been passed and the debtor had to sell his business in satisfaction of the decree. Mr. Gupta is right when he said that it is not stated in the affidavit that the property was sold in execution of the decree. Mr Sen has made a statement from the Bar that the sale proceeds of his business were diverted towards the satisfaction of the decree Thus it appears that the transfer of the business was not a voluntary transfer with the intention to defeat the claim of Mr. Gupta's client. On the contrary it is a transfer to satisfy the claim of a creditor in pursuance of a decree. In my opinion this is not a transfer with the intention to delay or defeat the claim of the creditor and as such this transfer cannot be considered as an act of insolvency. Mr. Gupta has also argued that there might be surplus sale proceeds out of the said transfer which could have been utilised towards the satisfaction of his client's claim. I haveno particulars before me to find out whether there was any surplus money out of the sale proceeds lying in the hands of the debtor or not. Prima facie, I do not find am transfer of the assets was made by the debtor to defeat the claim of the petitioner and as such there is no act of insolvency.

7. In the premises the application isdismissed The debtor's defence does notappear to me convincing. He has statedthat he has no Calcutta address, but it appears that he has received the solicitor'sletter at the Calcutta address. Further, hehas not disclosed particulars of the saleproceeds or his other assets, I accordinglydirect there will be no order as to costs.This order is made without prejudice to therights of the creditor to file a suit againstthe debtor and prove his claim on propermaterials.


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