KARNAGAM Vs. JAYASEELAM CHETTIAR

JUDGEMENT

(1.) THE Court below ought not to have dismissed the petitioner's application for adjudication as an insolvent under S. 10 (1) of the Provincial Insolvency Act, 1920. The petitioner's case in his petition was that he had incurred loans in cultivation and agricultural operations and incurred debts to the tune of Rs. 7,200 which is inclusive of a decree debt admittedly obtained against him by one of his creditors who is the first respondent in the application filed in the lower Court. It is not in dispute that the first respondent obtained a decree in o. S. No. 418 of 1971 on the file of the District Munsif's Court, Nagapattinam and that he has levied execution against him and obtained also an order of arrest in execution of the decree. Consequent upon such harassment by his creditors and him inability to pay the debts disclosed by him in the schedule to the petition. the petitioner came to Court with an application for voluntary adjudication, of himself as an insolvent. Excepting the first respondent, other creditors did not contest. The first respondent's case was that the debts disclosed by the petitioner other than the decree debt owing by him to the first respondent, were not true and genuine. According to the first respondent the petitioner is a rich mirasudar and that he owns amongst other things, a flour mill at Nagapattinam. He would contend that there has been an obvious suppression of such assets by the petitioner and that therefore the petition has to be dismissed. The learned Sub-Judge found that the petitioner owed the decree debt. But he would accept the first respondent's case that the petitioner owns a running flour mill besides a building and that as the petitioner is running the same, he should be presumed to be the owner thereof. The case of the petitioner in the lower Courts and before me is that the mill does not belong to him and it is not one of his assets. Nevertheless the Courts below found that the petition was not a bona fide one and dismissed the application for adjudication. It is as against this the present C. R. P. has been filed. The application for adjudication made by the debtor and initiated on his own volition is one which has to be scrutinised and disposed of in accordance with the provisions of the Provincial Insolvency Act as this is arising under that Act. When a person who claims himself to be a debtor wants to badge himself as an insolvent by invoking the process of law and stating that he is unable to pay his debts to his creditors, then such an overt expression of inability on the part of the debtor cannot lightly be disregarded by Courts on a priori considerations. In the instant case the first respondent has not only obtained a decree, but in execution he is seeking to arrest the petitioner. Obviously in order to avert an arrest and also for the reason that he was unable to pay his debts, the petitioner has filed the present application under S. 10 of the Provincial insolvency Act. The petition contains the contents which an insolvency petition should contain and the act of insolvency thereto is that he is unable to pay his debts. The first respondent as creditor, opposes this on the ground that there has not been a true and full disclosure of the assets of the petitioner. In particular his case is that the flour mill in Nagapattinam is an asset belonging to the petitioner and he having not disclosed the same should be deemed to have presented this application without any bona fides and that therefore the application merits dismissal. But the Act itself prescribes the procedure to be followed on the date when such an application is set for hearing. It says under proviso to S. 24 (1) (a) of the Provincial Insolvency Act that where the debtor is the petitioner, he shall, for the purpose of proving his inability to pay his debts, be required to furnish only such proof as to satisfy the Court that there are prima facie grounds for believing the same and the Court, if and when so satisfied, shall not be bound to hear any further evidence thereon. The legal interdict created by the language in the proviso as above in the matter of creation of a bar to hear any further evidence in case there are prima facie grounds to believe that the debtor is unable to pay his debts, has some significance. As in the instant case, if a creditor puts forward a story that the petitioner debtor is possessed of assets, it proves that at that stage, it would not be necessary for the court to hear any further evidence thereon, if it is satisfied about the inability to pay one's debts is necessary than his own solemn affirmation (sic ). This might appear to be a general observation. In the particular case, there is admittedly a decree as against the petitioner which is more than Rs. 500. The petitioner says that he is unable to pay his debts. Prima facie, therefore, there are grounds to believe the same in the sense that the petitioner is seeking for a voluntary adjudication and for the self-imposition of a badge of insolvency on him on the ground that he is unable to pay such debts at that stage; it appears to me that the Court is not bound to enter into any further investigation and much less hear any further evidence on the opulence or the ability of the petitioner to pay his debts. What the first respondent is attempting to do in this case is to disprove the allegation that the petitioner is unable to pay his debts by stating that the petitioner is possessed of assets to wit flour mill in Nagapattinam. Apart from the fact that the petitioner is disclaiming such an asset and is asserting that it is not his, it would be beyond the scope of the inquiry as contemplated in proviso as above for the Court to embark upon such an investigation to find ultimately whether the petitioner is able or unable to pay his debts. As already stated, this statement of the debtor that he was not able to pay the decree debt which is not able to pay the decree debt which is not in dispute, is sufficient prima facie proof that ground. The lower Court misdirected itself in causing a superficial inquiry to be held about the ownership of the Mill and ultimately to come to the conclusion that the petition is not a bona fide one. The provisions of the Provincial Insolvency Act, 1920 did not enable the Court to dismiss such application on such a priori considerations. In Chhatrapat Singh Dugar v. Kharag Singh Lachmiram, (1917)ILR 44 Cal 535: (AIR 1916 PC 64), it is said that if any such situation arises the stage at which the Court can visit the petitioner with any alleged consequences of any misconduct of the debtor, is when the debtor applies for discharge and not on the initial proceedings, when an application under the Act is made by the debtor himself to be declared as an insolvent. If such an inquiry is contemplated, the Act should have specifically provided for it. It has not. The reason appears to be obvious. The Official Receiver who would come into the picture after adjudication and who represents the body of creditors, would necessarily investigate into the question for the benefit of the creditors and if any asset has been screened by the debtor, he would bring the same into the pool for the purpose of division amongst the body of creditors. For this and for the reasons already stated, the lower Courts failed to exercise jurisdiction in law and had committed an apparent error in having dismissed the application for voluntary adjudication. This civil revision petition is allowed. No order as to costs.

(2.) PETITION allowed.