KANCHERLA ACHIRAJU Vs. KUSUMANCHI RAYALU

JUDGEMENT

(1.) This revision petition arises out of an application filed by the respondent-creditor, K. Rayulu, under Section 9 of the Provincial Insolvency Act, hereinafter called the Act, for adjudicating as insolvents the 2nd respondent herein which is a firm and the petitioner and respondents 3 and 4, who are the partners of the above-said firm. The central facts are as follows:- It was alleged in the petition that the petitioner and respondents 3 and 4 are the partners of the firm which is the 2nd respondent here. The partners acting on De-half of the firm borrowed for the respondent-firm Rs. 13,000.00 on 6-1-1951 and executed a promissory note which was subsequently renewed on 2-1-1954 for Rs. 16,962-9-0. They also borrowed a further sum of Rs. 5,500 on 4-1-54 for which another promissory note was executed in favour of the respondent. The partners did not pay that amount. Several individual acts of insolvency were alleged against the partners and a joint act of insolvency against all the partners in reference to a lorry belonging to the firm. On the basis of these acts of insolvency the respondent prayed that the firm as well as the three partners should be adjudicated insolvents. This petition was resisted by the petitioner and the 3rd respondent. Respondent No. 4 remained ex parte. The substance of their defence is that they did not commit any act of insolvency within the meaning of the Act. They admitted the allegations made in the petition but stated that they never effected transfers with an intent to defraud or delay the payment of the debt due to the respondent. Their contention was that the transfers were made in bona fide discharge of the antecedent debts.

(2.) On these pleadings and after recording the evidence adduced by the parties the Additional Subordinate Judge, Kakinada, allowed the petition and adjudicated all the three partners and the firm Insolvent. The learned Subordinate Judge held that the petitioner has succeeded in proving not only the individual acts of insolvency but also the collective act attributed to all the partners in reference to the sale of a lorry belonging to the firm. It was found that these transfers were made with an intent to defraud the creditor-petitioner. Dissatisfied with that order the petitioner went in appeal before the District Judge, Rajahmundry, The 3rd respondent also filed a Memorandum of Cross-objections. The appeal as well as the Memorandum of Cross-objections were heard together. The learned District Judge dismissed the appeal as well as the memorandum of cross-objections concurring with the conclusions of the Subordinate Judge mentioned above. It is this view of the District Judge which is assailed before me in this revision petition.

(3.) Mr. K. Krishnamurthy, the learned Advocate far the petitioner contends that the firm cannot be adjudicated insolvent and in any case not for the alleged acts of the partners. His submission is that those acts were not enough to adjudicate the firm as insolvent. In support of this contention he relied upon a passage occurring at page 96 of the Law of Insolvency in India by D. F. Mulla, and a decision of the Madras High Court in Gopal Naidu v. Mohanlal Kanyalal, 49 Mad LJ 709 : (AIR 1926 Mad 206). The passage relied upon from Mulla is as follows:-