P V GANDHI Vs. GITANJALI

JUDGEMENT

(1.) PETITION under Sections 9 (b) and 9 (d) (ii) and (iii) and 10 to 13 of the Presidency towns Insolvency Act. 1909, to adjudge respondents 1 to 4 as insolvents. The 1st respondent Messrs. Gitanjali is a registered partnership, of which the partners were respondents 2 to 4. The petitioner claims to have advanced a sum of Rs. 5,000/- on a promissory note dated 8th June 1971 executed by the second respondent on behalf of the firm. It is alleged in the petition that on 7-8-1971 the debtors issued a cheque for Rs. 5,000/- towards the principal, that the cheque when presented, was returned dishonored, and that debtors failed and neglected to pay the amount. It is also alleged that on 7-8-1971 the debtors transferred the entire business in favor of the fifth respondent who put up his name board at the place of business premises, that the transfer was fraudulent that in spite of the efforts taken to contract the second respondent at his residence and also at his other place of business in No. 3/39, Godown Street, he could not be traced, that the said business place of the second respondent was also locked and closed from 10-8-1971 and that the second respondent secluded himself with a view to deprive his creditors of the means of communicating with him and also departed from his dwelling house and the usual place of business. It is further alleged that the transfer of the entire business in favor of the fifth respondent was made with a view to defeat and delay the creditors and that thereby the debtors committed acts of insolvency falling under Sections 9 (b) and 9 (d) (ii) and (iii) of the Act.

(2.) RESPONDENTS 1, 3 and 4 appear by a counsel and contend that on 31-3-1970 the third respondent retired from the partnership, and that from 1-4-1970 the firm consisted of only two partners, namely, respondents 2 and 4. Their case is that even on the date of the loan itself, namely, 8-6-1971, the financial broker mishnilal Dharwal took a post-dated cheque for Rs. 5,000/- dated 7-8-1971 and also took interest for two months by cheque. Though the broker was informed that the cheque should be presented only after arrangements had been made for its encashment, the cheque was presented contrary to the understanding. The allegation that the business was transferred with a view to defeat and delay the creditors is denied. Their case is that the transfer was effected bona fide for valuable consideration in pursuance of an arrangement which the second respondent had entered into with the Bank of India who had given overdraft facilities to the firm on the guarantee of the fifth respondent for a sum of Rs. 1 lakh. It is alleged that out of the sum of Rs. 1,12,000/- for which the transfer was made a sum of Rs. 1 lakh was retained by the fifth respondent for payment towards overdraft account and the balance of Rs. 12,000/- was paid in order to enable the second respondent to pay arrears of rent to the landlord of the premises 3/39, Godown Street and also for the purpose of improving his wholesale business which he was conducting in the said premises. The allegations that the second respondent made himself scarce and secluded himself so as to deprive his creditors of the means of communicating with him or that he departed from his dwelling house and the place of business are denied as false. It is further alleged that no act of insolvency, as alleged by the petitioner, is committed.

(3.) THE third respondent alleged in his counter affidavit that on the date of the loan, he was not a partner of the firm, he having retired from partnership even on 31-3-1970, that, as such he cannot be deemed to have been benefited by the loan and that he is not concerned with the alleged acts of insolvency attributed against the second respondent. The case of the fifth respondent is that he purchased the business in discharge of a liability of the firm to the bank in respect of the overdraft account for which he had given guarantee and that the transfer was a bona fide transaction and is not liable to be impugned.