BHAWANI PRASAD Vs. SHRI KISHAN

JUDGEMENT

(1.) THIS is an appeal under section 75 of the Provincial Insolvency Act, 1920 (hereinafter called the Act).

(2.) THE appellants are the creditors. THEy made an application against the three respondents under section 9 of the Act for getting them adjudged as insolvents. Respondents 1 and 2 are partners of the firm Shrikrishan Bhagwandas, Vidisha, which is respondent No. 3 on record. THE appellants in their application stated that the respondents were indebted to them in the sum of Rs. 35,371.40 paise which was payable immediately to them. THE acts of insolvency alleged to have been committed by the debtors were that with intent to defeat or delay the creditors the first and' the second respondents had secluded them selvess so as to deprive their creditors of the means of communicating with them and that they had given notice to the appellants that they were not in a position to pay their debts and had suspended payments of the debts. In other words, the application was grounded on acts specified in clauses (d) and (g) of section 6 of the Act. Before admitting the petition, the Additional District Judge, Vidisha, examined respondents 1 and 2 under Order 1, rule 10, Civil Procedure Code and then directed the petitioners to produce prima facie evidence to establish that their petition deserved admission. In consequence of the said direction, both the appellants and the respondents examined witnesses. By his order dated 31-8-1964 the learned Additional District Judge admitted the petition under section 18 of the Act and appointed an ad interim Receiver of the property of the respondents giving certain directions to the ad interim Receiver in the matter of the management of the property.

(3.) WE shall take up the second point for consideration first. Section 24 (2) enacts that the Court shall also examine the debtor, if he is present, as to his conduct, dealings and property in the presence of such creditors as appear at the hearing, and the creditors shall have the right to question the debtor thereon. The object of the provision is to obtain information at as early a stage as possible of the property of the debtors and their whole conduct in relation to the insolvency proceedings. In Gangadas Seal and another v. Percival and others, AIR 1927 Cal 32, it has been held that sub-section (2) of section 24 is mandatory and if the debtors are present in Court, there is an obligation on the Court to examine them and failure to do so would vitiate the order of adjudication. In Popa Bam v. Bara Khan, AIR 1935 Peshawar 139, the same view has been taken. In Bala Bam Sant Bam v. Gyan Singh and others, AIR 1930 Lah 746, the facts were that the debtor had made an application for his being adjudged an insolvent and his application was dismissed without his examination. It was held that the provisions of section 24 (2) were mandatory and the Court must examine the insolvent with reference to the facta stated in the petition before dismissing his application for being adjudged an insolvent. In Sita Ram Bajirao Bhalerao v. Amrutrao Ganpatrao Kunbi and another, AIR 1937 Nag. 226=ILR 1939 Nag 463= 10 R. Nag. 338, it was held that the failure to examine the debtor when the petition for adjudicating him an insolvent was presented by the creditor did not invalidate the subsequent proceedings, unless it was shown that the debtor had been prejudiced by the omission. The learned Judge attached a great deal of significance to the fact that in that case the debtor had filed a written statement and gave evidence on his behalf and therefore was not obviously prejudiced.