MALGA SOMIAH Vs. P PADMA BAI

JUDGEMENT

(1.) This appeal by the debtor preferred against the order of the Chief Judge, City Civil Court, Hyderabad, dismissing his application under section 10 of the Hyderabad Insolvency Act, gives rise to the following interesting and important questions of law : (1) Whether the appellant's application under section 10 of the Hyderabad Insolvency Act to declare himself as an insolvent is maintainable in view of the fact that the respondent is the sole creditor' (2) Whether the Insolvency Court is competent and has jurisdiction to enquire, at that stage, either with regard to the bona fides of the applicant or his inability to pay his debts, beyond the statement made by him. (3) Whether the applicant on the facts and in the circumstances is unable to pay his debts entitling him to file this application ? To appreciate the questions that arise for determination, it is necessary to narrate the brief and relevant facts which lie in a short compass.

(2.) The appellant filed an application under section 10 of the Hyderabad Insolvency Act to declare himself as ah insolvent, on the ground that he has no means and capacity to discharge a debt of Rs. 6,000 due under a decree passed on 27th February, 1956 to the respondent as he has no other assets, except those shown in 'B' Schedule worth about Rs. 15. The appellant states that he has paid an amount of Rs. 1,800 towards aforesaid decree and the respondent is trying to execute the decree for the balance, by obtaining a warrant of arrest. It is resisted by the respondent scale creditor on the grounds that the appellant is running a business of hiring tents with an investment of Rs. 50,000 in the name of his minor son ; that he owns two houses worth Rs. 9,000 kept in the name of his wife ; that he has got assets in the shop amounting to Rs. 60,000 fetching a monthly income of Rs. 1,500 and besides, he earns about Rs. 5,000 a year by arranging Yatra Specials for Hindu pilgrims, and hence the appellant's contention that he is unable to pay the debts in untrue and untenable. The appellant examined himself as P.W. 1 and filed Exhibit A-1 and Exhibit A-2 in support of his plea. The respondent examine d R.W. 1 and filed Exhibits B-1 to B-4 in support of her contention. The learned Judge framed the following points for consideration : (i) Whether the allegation in the petition that he is not possessed of any assets exceeding Rs. 15 is true, and (2) Whether he has no means or capacity to discharge his debt. On a consideration of the evidence on record, the learned Judge dismissed the application holding that it is not bonafide and that the applicant's plea that he is unable to pay his debts is not acceptable and this application has been filed with intent to defeat the claims of the respondent. Aggrieved by the order of the lower Court, this appeal is preferred by the applicant.

(3.) Mr. Mohanarao, the learned Counsel for the appellant strenuously urged that the entire approach and the reasoning of the learned Judge is erroneous and illegal as the Insolvency Court has no jurisdiction at that stage to consider the question of bona fides of the debtor and that the lower Court has no other go except to accept the statement of the applicant that he is unable to pay his debts and adjudicate him as an insolvent and cited Chatrapat Singh Dugar v. Kharaj Singh Lachmiram , AIR 1926 PC 64. Racharla Narayanappa v. Kondigi Bheemappa , AIR 1926 Mad 494. Srirangachariar v. Narasimha Iyer and others , AIR 1928 Mad 1193. Satdeo Narain and others v. Union of India through Income-tax Officer, Gay a and others , A.I.R. 1964 Pat. 521. in support of his contentions. Mr. N.V. Suryanarayanamurthy (amicus curiae) contended inter alia that the appellant's application to declare himself as an insolvent under section 10 of the Act, when there is admittedly the sole creditor-respondent herein is not maintainable and even on merits the decision of the lower Court is correct as there is no error of law of procedure in the present case and cited some authorities in support of his contentions.