KHUSHHALIRAM Vs. BHOLAR MAL

JUDGEMENT

(1.) THIS is an appeal from an order passed by the Additional Judge of Meerut in tin insolvency proceeding. One Mutsaddi Lal applied to be adjudicated an insolvent, on the 10th of March 1914. His application was opposed by one of his creditors, named Khushhali Ram, on various grounds, but he was so adjudicated by an order of the same date. On April 6th, 1914, Khushhali Ram, who was a creditor shown on the insolvent s schedule, presented an application to the Court, the rejection of which has led to the present appeal. The application was badly drafted, it referred to no definite section of the Provincial Insolvency Act and it alluded in a confused manner to two separate transactions, with one of which we are not now concerned. In substance, however, the application was one which deserved more consideration at the hands of the Additional Judge than it has received. The allegation was that a mortgage deed executed by the insolvent on the 26th of November 1913 in favour of one Bholar Mal, for a sum of Rs. 1,500, was a fictitious transaction, entered into merely to prejudice the creditors of the executant. Whether the application is to be regarded as one asking for the removal of the name of Bholar Mal from the schedule of creditors, or as one falling under the provisions or Section 36 of the Provincial Insolvency Act (III of 1907), the matter was one which required investigation. The learned Additional Judge seems to have thought that it was quite sufficient for him to note that he had before him a registered document admittedly executed by the insolvent. He held that no further enquiry was required, or could properly be conducted, in the insolvency proceedings, and that Khushhali Ram s remedy, if any, was by way of a separate suit, in our opinion the learned Judge misconceived the extent of his jurisdiction in insolvency proceedings. He was bound to enquire into this question of the alleged mortgage, at the instance of any creditor who claimed to be prejudiced thereby. He might have come to the conclusion that there had been a transfer by way of mortgage under circumstances calling for interference on his part under Section 36 of the Insolvency Act, or he might have found that there had been a purely fictitious transaction, not involving any transfer; in either case the name of Bholar Mal would require to be removed from the list of creditors and the property purporting to be affected by this mortgage would become available for the benefit of all the creditors, free of incumbrance. We think that Khushhali Ram s application should have been taken up, notice of the same given to the insolvent and to Bholar Mai, and the questions raised enquired into and decided. We set aside, accordingly, the order complained of and remand the case to the Court below with directions to enquire into the matter as stated above. The costs of this appeal will abide the result of the further enquiry hereby directed.