HARNAM SINGH Vs. BALAI KUMAR SINHA

JUDGEMENT

(1.) This is an appeal under Section 75 (2) of the Provincial Insolvency Act (hereinafter referred to as 'the Act') by the creditor. He claims to have advanced a sum of Rs. 5,000/- on a handnote on the 17th August, 1964 to the debtor (respondent No. 1). He served a notice of demand as early as on the 17th July, 1965, but did not bring any suit for recovery of the amount although a sum of Rs. 100/- only is said to have been paid by the debtor on 16th August, 1966. Just a day before the expiry of the limitation, a further sum of Rs. 500/- is said to have been paid by him on the 17th July, 1969. By these two payments, the debt, however, did not become barred. The most relevant fact in this case is that the debtor in pursuance of the notice of demand had clearly informed the appellant and certainly on the 25th May, 1968 by a letter which is on the record of this case as Ext. 3 that he was heavily involved in debts and unable to pay anything to any of his creditors and that he had suspended payments to all of them including the appellant The petition of insolevency, however, was not filed within the prescribed period from the receipt of those declarations from the debtor, but as late as on the 8th June, 1970. The other intervening fact that should be stated is that respondent No. 2 another creditor of the debtor, had obtained a consent decree for above Rupees 10,000/- on the 11th July, 1969, against the debtor and was proceeding against his house property in the execution proceeding. The petition for insolvency was filed in the year 1970 in this background. The debtor in his reioinder as well as in his evidence in the proceeding before the District Court had admitted that he was unable to pay the debts and also confirmed his earlier stand communicated to the appellant in pursuance of his notice of demand, already referred to. The plea of the other creditor, namely, respondent No. 2, was that the appellant and the debtor were hands-in-glove and the entire transaction was collusive in order to deprive him of the fruits of his decree. The District Court, on reference to various circumstances, has dismissed the application under Section 25 of the Act by clearly holding that the insolvency petition was filed by the petitioning creditor in collusion with the debtor. I shall advert to this incident a little later. The District Court has further held that there was no evidence on record to show that the act of insolvency on which the insolvency petition was grounded had occurred within three months before the presentation of the same.

(2.) Mr. Mitra, appearing in support of this appeal, has challenged the judgment of the learned District Judge dismissing the petition on the above grounds. With respect to the first ground, learned Counsel contended that the learned District Judge has committed an apparent error in not referring to the evidence of the creditor that he had made demands of the debt from the debtor within a period of three months from the date of the presentation of the petition and has recorded the finding against the appellant with reference to certain written demands only. It is no doubt true that the appellant after adverting to the preliminary demands and previous notice had also subsequently stated that he went personally to the debtor again on the 6th June, 1970 and demanded the dues when he openly expressed his inability to pay the same. However, there is a serious difficulty in the way of the appellant on which this appeal has Sot to fail. Section 9 of the Act prescribes that a creditor shall not be entitled to present an insolvency petition against a debtor unless, inter alia, the act of insolvency on which the petition is grounded has occurred within three months before the presentation of the petition (vide Clause C). Acts of insolvency have been enumerated under Section 6 of the Act. The relevant clause thereof for the present case will be Clause (g) which reads as follows :

(3.) Mr. Mitra, however, laid emphasis that the debtor made pavments towards the debt in question -- once on the 16th August, 1966 and again on the 17th July, 1969 on pressing demands by the appellant. On the basis of these materials, he contended that his earlier declaration that he had suspended payments to all the creditors and was unable to pay anything towards the debt which constituted an act of insolvency within the meaning of Section 6, Clause (a) of the Act, would automatically stand rescinded. It is difficult to accept the contention of learned Counsel, for two reasons : firstly, that it is well settled that a debt may be barred for the purpose of recovery through the assistance of Court but it is not wiped out as such. Therefore, there is no bar at any time for a debtor to make any payment to his creditor. Secondly, the contention must be overruled on a technical ground also that the act of insolvency was made complete in May 1968, whereas the payment was made on the 17th July, 1969, much after the expiry of the period of three months within the meaning of Clause (c) of Section 9 of the Act. and it thus ceased to be an act of insolvency by itself. The payment of the sum of Rs. 500/-, therefore, would not in any wav be of any consequence in this case.