CHAVAKULA VENKATAKRISHNAYYA Vs. TALLURI MALAKONDAYYA

JUDGEMENT

(1.) The petitioner here was adjudicated an insolvent on a creditor's application under Section 9 of the Provincial Insolvency Act, and the order of adjudication was confirmed in appeal. The civil revision petition challenges the correctness of this appellate order.

(2.) The grounds on. which the adjudication was challenged in the Courts below relate to the subsistence of the debt in favour of the petitioning creditor, having regard to an alleged agreement for sale and also having regard to a possible retrospective Operation of Act IV of 1938. These contentions are not now pressed. The argument before us has been confined to the question whether the judgment of this Court in C.M.A. Nos. 330 to 332 whereby the Court sale which formed that act of insolvency has been set aside, would warrant the cancellation of the order of adjudication. The judgment referred to was passed on the 23 October, 1941, so that at the time of the adjudication and also at the time when the appeal to the lower Court was heard, the contention which has been urged before us could not have been advanced. It is argued that there is no act of insolvency when a sale in execution has been held and that sale has not been confirmed or having been confirmed, has been set aside as a result of a deposit under Rule 89 of Order 21, Civil Procedure Code.

(3.) There appears to be no decided case covering this actual point. Two cases have been quoted, Lal Chand Vs. Bogha Ram A.I.R. 1938 Lah. 819 and. Kanailal v. Tinkari De in which it was held that the date of the sale for the purpose of limitation to an application under S. 9 of the Provincial Insolvency Act is not the date of the confirmation, but the date of the actual sale. "We have also been referred to Colkett V/s. Freeman (1787) 2 T.R. 60 : 100 E.R 33 in which it was held that a clear and unequivocal act of bankruptcy such as suspension of payment cannot be explained away by the subsequent circumstance that the creditor was paid. It seems to us that none of these cases really touch the point which we have . to decide. Under Section 6 (e) of the Provincial Insolvency Act a debtor commits an act of bankruptcy if any of his property has been sold in execution of the decree of any Court for payment of money. Under Order 21, Civil Procedure Code, we find both in Rule 89 and in Rule 90 the words "where any immovable property has been sold in execution of a decree used to indicate a sale which has been held and awaits confirmation and one which is liable to be set aside either as a result of a deposit or as a result of an objection to the procedure. That is to say, the words "property has been sold in execution of a decree , when used in Order 21, Civil Procedure Code, refer not to an indefeasible sale, but to a sale which has . been actually held but which may be set aside as a result of subsequent proceedings. It seems to us that there is no apparent necessity for giving greater weight to the words in Section 6 of the Provincial Insolvency Act than they carry in the relevant rules of Order 21 to which Clause (e) of Section 6 of the Provincial Insolvency Act Naturally has reference. The enumeration of the various acts of insolvency in Section 6 seems to contemplate those acts which in the public eye shake the credit of a debtor and are likely to cause a scramble amongst tie creditors for his assets. The man may actually be solvent, but may still commit an act of insolvency by suffering something to be done which shakes his apparent credit, as when he disappears from his normal dwelling house or hides himself from his creditors or under the corresponding provision of the Presidency Towns insolvency Act, suffers some attachment of his property in execution of a decree to subsist for 21 days. All these are outward and visible signs that a man's credit has been shaken and they are circumstances which are likely to cause a panic amongst his creditors. Consequently they justify any creditor, in asking the Court to step in and see that there is a fair distribution of the debtor's assets.