JETHMAL NARANDAS Vs. MAHADEO ANANDJI DHORIA

JUDGEMENT

(1.) THIS is an appeal from an order made by Mr. Justice Somjee in insolvency adjudicating the appellant an insolvent, and, in my opinion, it is perfectly clear that the order ought not to have been made.

(2.) THE facts are these. THE appellant and his wife in the year 1935 obtained an advance of Rs. 14,000 from the respondents on the security of ornaments belonging to the wife, and a promissory note was also given for the debt. It is said that in the year 1935 one of the pledged ornaments was sold for about Rs. 3,000. In 1936 there was a further promissory note for the amount then due, which was Rs. 11,840. THEn it: is said that sometime after that another ornament was sold for Rs. 995. In 1939 the respondents as pledgees gave notice to the pledger that they intended to sell the pledged goods, and an arrangement was come to on January 5, 1939, by which the pledgees were to take over the remaining ornaments, and the pledger gave a promissory note for the balance. On that promissory note a summary suit was filed, and on February 12, 1940, there was a consent decree for the amount claimed and costs, time being given to the debtor to redeem the ornaments. But the ornaments were not redeemed. Accordingly an insolvency notice was served on the appellant on July 2, 1940. An application was made by the appellant to set aside that notice, but that application was dismissed, and I think rightly so, because there had been no stay of the consent order, and the debtor did not bring himself within the proviso to Section 9 (i) of the Presidency-towns Insolvency Act. THE result, therefore, was that there was an act of insolvency, and on August 13 the creditors presented a petition asking that the judgment-debtor be adjudicated insolvent. On that petition the debtor filed an affidavit, and in paragraph 4 he stated this: Until recently both myself and my wife honestly believed in the statement of the plaintiffs regarding the sale proceeds of the said diamond kada and the diamond bracelet. Those are the two ornaments sold to which I have referred. THEn the affidavit goes on: Relying on their statement made on oath in the affidavit and their assurance,. I accepted their figures. Very recently, however, I came to know that the plaintiffs had caused the said jewellery to be sold through the said Mohanlal to a member of a Ruling Indian family for Rs. 9,000 but that they have failed to account to me or to my wife for the correct amount of the sale proceeds. So that the case of the appellant is that certain of the ornaments were sold for a much higher figure than the pledgees admitted, and that if the pledgees had accounted for the true figure, there would have been no debt due; that is" to say, he challenged the consent decree in effect on the ground that it was obtained by fraudulent suppression of material facts. That affidavit was not answered, but the learned Judge made the order of adjudication.

(3.) IN this case it seems to me that, on the materials before the learned Judge, it was wrong for him to hold that he was satisfied as to the validity of the debt. IN the affidavit of the debtor the point is made that pledged ornaments had been sold at a much higher price than that admitted to a Ruling Prince through a named agent, and it was for the learned Judge to be satisfied, before making the order, that that allegation was not true. If the INsolvency Judge thinks that prima facie the debtor's defence to the debt is not bona fide, he can, under Section 13(6), put the debtor on terms requiring him to give security, and on those terms stand the petition over. But, in my opinion, having regard to the fact that the petitioning-creditors put in no answer at all in answer to the debtor's allegation, it is impossible to say that a prima facie case is made out. The judgment by itself does not make out such a prima facie case, and I think that the learned Judge should have required evidence as to this alleged sale of ornaments for Rs. 9,000. If the respondents had produced their books and an affidavit by the agent disclosing the name of the purchaser, it may be that that would have been sufficient prima facie evidence, but at the moment there is nothing of that sort.