DEV TRADERS BY PARTNER P.V. MAKWANA AND OTHERS Vs. S. DEENADAYALU, SOLE PROPRIETOR OF SRI GOPINATH TEXTILES AND ANOTHER

JUDGEMENT

(1.) This is an appeal against the judgment of Sethuraman, J. dismissing a petition for adjudicating the first respondent as an insolvent. The first respondent is a dealer in textiles. The petitioning creditors, who are also dealers in textiles, supplied goods to him for which he had to pay the first petitioner Rs. 3700, second petitioner Rs. 767 -50, third petitioner Rs. 3039 -67 and fourth petitioner Rs. 6125 -23. The debtor is alleged to have given notice of suspension of payment at a meeting of the creditors held on 4th April, 1972 at 5 -30 p.m. The second respondent is alleged to have been chosen by the creditors to file I. P. No. 35 of 1972. On 9th October 1972, the second respondent received a sum of Rs. 10,000. On 10th October 1972, when the petition came up for hearing, the counsel for the second respondent reported 'no instructions' and thereupon I.P. No. 35 of 1972 was dismissed for non -prosecution. The appellants who were present in the court applied for substituting themselves in I.P. 35 of 1972, alleging that the payment to the second respondent was a fraudulent preference within the meaning of S. 9(e) of the Presidency Towns Insolvency Act. This application was opposed by the first respondent who contended that he did not commit any act of insolvency and that the payment of a sum of Rs. 10,000 by him to the second respondent herein was under pressure. The second respondent supported the contention of the first respondent that there was no fraudulent preference. The learned Judge accepted the contention of the respondents and dismissed the petition.

(2.) The appellants now contend that the dominant intention of the debtor was to make the petitioning creditors to report no instructions and withdraw the insolvency petition, that there was no benefit to the estate of the debtor which, in the context, should mean the general body of creditors, and that therefore, the order of the learned Judge should be set aside. The question to be considered is whether the payment of a sum of Rs. 10,000 by the first respondent to the second respondent was a fraudulent preference and hence an act of insolvency committed by the first respondent. It is not disputed that a sum of Rs. 10,000, was paid by the first respondent to the second respondent on 9th October 1972, and consequently on 10th October 1972, the second respondent who had filed I.P. 35 of 1972, allowed the petition to be dismissed, and that it was dismissed on his counsel reporting no instructions. In order to constitute a fraudulent preference, the act of the debtor must be voluntary. In other words, it must be a deliberate or spontaneous act, an act of free -will. Payment under pressure, legal or illegal, is not a voluntary act. Fraudulent preference implies a deliberate discrimination between creditors. If the dominant intention of the debtor was to benefit himself, then the payment to one creditor alone would not constitute an act of insolvency. Preference must be the dominant view. In Williams on Bankruptcy it is observed that - -