K MARANAICKEN Vs. R S SARADHAMBAL

JUDGEMENT

(1.) In this revision under the Provincial Insolvency Act, 1920 from the appellate order of the District Court, the question is whether an order of adjudication passed against a debtor is valid ? The act of insolvency alleged by the petitioning creditor against the debtor was that within three months of the presentation of the insolvency petition, the debtor has alienated the most valuable property of his to a third party. The debt due to the petitioning creditor was under a promissory note. It was for Rs. 5350. The debtor has realized Rs. 33,000 from the sale of some of his properties and Yet from out of the proceeds, he did not pay anything, towards the discharge of the debts.- It was alleged by the petitioning creditor that the sale by the debtor of his properties was with intent to defeat and delay his creditors. The debtor denied this act of insolvency. He asserted that the sale effected by him was bona fide, He said that out of the proceeds of sale, he had discharged certain debts to an extent of Rs. 8000 and the balance was utilised for conducting the marriage of his two sons, for 'seers, or presents to his daughter and for digging a well. The debtor also submitted that even after the sale of the properties, he retained with him a considerable extent of immovable properties including an extent of 5 acres of nanja land worth at least Rs. 1,00,000. In these circumstances. the debtor denied there was any intention on his part to defeat or delay his creditors by the mere act of selling some of his properties. He also submitted that the insolvency petition against him was mala fide and was intended to circumvent the provisions of the. Tamil Nadu Act. 10 of 1975, which imposes a bar on the petitioning creditor from realizing her debt for the period of the moratorium laid down under that Act.

(2.) Both the Sub Court in the first instance and the District Court in appeal, held, that the sale by the debtor of his properties was without making any provision for the petitioning creditor and it amounted to, an act of, insolvency. They- accepted the position that even after the sale, the debtor had with him considerable properties, Both the courts. however. dismissed the continued existence of other items of immovable property of the debtor as irrelevant to the discussion, expressing the view that a debtor could successfully resist an order of adjudication on the creditors petition only if he could satisfy the court that he is able to pay his debts and not by showing that he was possessed of immoveable property. The Sub Court found that there was no evidence to show that the debtor had applied the sale proceeds of Rs. 33,000 either for payment of some of his credit the marriage of giving presents to his digging a well. Both the Sub Court and the District Court accepted the position that by reason of Act 10 of 1975, the petitioning creditor would have been barred from filing a suit against the debtor for realization of the amount. They, however, held that Act 10 of 1975 cannot be a bar to the insolvency petition. The Sub Court further observed that although the filing of the petition was to circumvent the bar imposed by Act 10 of 1975, still it cannot be an answer to an order of adjudication passed, on the act of insolvency alleged by the petitioning creditor in this case.

(3.) The order of adjudication supported by the reasons aforesaid, is now being challenged in this revision by the debtor. Under the scheme of the Provincial Insolvency Act, a creditor can only petition for adjudicating his debtor an insolvent by alleging the act of insolvency occurring within three months before the presentation of the petition. S. 6 lists out in cls, (a) to (h), what are acts of insolvency. In this case, the act of insolvency alleged against the debtor was stated to fall under cl. (b) which lays down that a debtor commits an act of insolvency if he makes a transfer of his property or any part thereof with intent to defeat or delay his creditors. S. 9 sets out the circumstances under which a' creditor may file an insolvencv petition. S. 13 (2) enacts what are the particulars which a creditor should set i forth in his insolvency petition. S ' 24 lays down the procedure at the hearing of in insolvency, p6tition. S. 27 provides when and in, what circumstances the order of adjudication caft, be passed' by- the-:court. S. 25 (1) enacts,jtors or for performing his sons or for daughter or for when and in what circumstances the insolvency petition must be dismissed by the court, for ,instance, the court must dismiss a creditor's insolvency petition if the Proof adduced by the creditor on the act of insolvency alleged by him against the debtor is not regarded as by the court as satisfactory proof. Again, the court must dismiss the creditor's insolvency petition if, in its opinion, there is sufficient cause which warrants that there should be no order of adjudication against a debtor.