ISHAQ Vs. BABU RAM

JUDGEMENT

(1.) BABU Ram, opposite party No. 1 applied for adjudication of the applicant Ishaq as an insolvent by moving a creditor's petition under the Provincial Insolvency Act. He alleged that on September 1,1969 he had advanced Rs.800/-to Ishaq who had executed a pronote and receipt but Ishaq transferred his entire property by a sale-deed dated August 5, 1969 in favour of his own wife and the wife of his brother. He has hence committed an act of insolvency. The trial Court dismissed the application on the finding that BABU Ram has failed to prove that he advanced any loan to Ishaq. On appeal, the finding was reversed. It was held that the petitioning creditor has proved the mak ing of the loan and the execution of the pronote. It was further held that by transferring his entire property the debtor has committed an act of insol vency. The petition was allowed and the official receiver was directed to proceed against the properties of Ishaq in accordance with law. Aggrieved, Ishaq has come to this Court in revision. The finding that the petitioning creditor has established the advance of the loan and the execution of the pronote is a question of fact and does not suffer from any error of law. Learned counse, however, argued that the applicant had executed the sale-deed on August 5, 1969 at a time when there was EO creditor. In other words, at that time he was not indebted to any one. It could not hence be said that he made the transfer 'with intent to defeat or delay his creditors' within the meaning of clause (b) of Section 6 of the Provincial Insolvency Act. Learned counsel submits that before clause (b) can apply, there must be a creditor in existence on the date of the transfer else it cannot be said that the transfer was made with intent to defeat or delay his creditors. In my opinion, the submission is sound. The gravamen of the charge under clause (b) is that the transfer is with the intention of putting off the creditors. A person cannot be imputed such an intention if, in fact, there is no creditor in existence on the date when the transfer is made. Clause (b) does not, in my opinion, apply to a situation when a person takes a loan after he has trans ferred his properties. In such a situation, the creditor, if he advances a loan without security cannot castigate the debtor and impute an, intent to him to de feat and delay the creditor simply because the debtor had prior to the incurring of the debt, transferred his properties. Clause (b) speaks of an event which happens after the transaction of loan, that is to say, after the coming into existence of a creditor. On the submitted facts and, in the absence of any proof of fraud or fraudulent intention, it cannot be said that the applicant committed an act of insolvency within the meaning of clause (b) of Section 6. The revision succeeds and is allowed. The judgment of the lower appellate Court is set aside and that of the trial Court restored. As no one has appeared on behalf of the opposite party, there will be no order as to costs.