THANGATUR RAMAYYA Vs. KATTA VENKATTANNAGARI SREENIVASAYYA

JUDGEMENT

(1.) This second appeal is from the decree of the Subordinate Judge of Ananfcapur dated 15th March 1929 in appeal from the decree of the District Munsif of Penukonda dated 25 January 1928 in a suit for establishing the plaintiff's right to attach certain properties in execution of the decree in O.S. No. 1051 of 1926, on the ground that the sale of those properties in favour of defendants 1 and 2 are void as being intended to defraud creditors. The suit was resisted on several grounds but the decision of both the Courts below was based entirely on the preliminary ground that the main question raised in the suit, namely whether the sales in favour of defendants 1 and 2 were intended to defraud creditors was res judicata by reason of the order dismissing I.P. No. 3 of 1925 in which the plaintiff was the petitioner and defendants 1 and 2 were respondents 4 and 5. In that petition the petitioner, the plaintiff in the present suit, sought to adjudicate defendants 3 to 5 in the present suit as insolvents, the acts of insolvency alleged against them being the sales of the plaint properties by them in favour of defendants 1 and 2. That petition was dismissed as the insolvency Court held that the sales could not be said to be fraudulent as the intention to defraud creditors was not established. It was contended that this order dismissing the petition in accordance with the finding that these alienations were not proved to be fraudulent prevents the plaintiff from raising the same question in the present suit against the same parties. This contention was accepted by both the Courts below and the suit was dismissed.

(2.) In this second appeal the only point that is argued is that the decision of the Courts below that the question whether the sales were fraudulent or not is res judicata is not correct, and that the decision of the insolvency Court on a petition for adjudication has not the force of res judicata in a suit of this kind. I have no doubt, and the point is not in dispute, that, if the decision of the insolvency Court is one that falls within the purview of Section 4, Provincial Insolvency Act, such decision would be res judicata as Sub-section 2 of that section clearly states that such a decision shall be final and binding for all purposes as between the debtor and the debtor's estate on the one hand and all claimants against him or it and all persons claiming through or under them or any of them on the other hand. The question is now raised as between persons claiming under a debtor and a person claiming against a debtor. The question however is whether the decision in the present case, namely the order dismissing the petition for adjudication, is a decision which falls within the purview of Section 4. It is clear from Section 4 that it relates only to decisions on questions which arise in a case of insolvency. Prima facie, there can be no case of insolvency unless there is an adjudication. At the stage when an application for adjudication is tried questions of title to property as between the debtor and others do not arise for determination. It is clear from Section 25, Provincial Insolvency Act, that where, as in this case a petition is presented by a creditor, and the Court is not satisfied with the proof of his right to present the petition, or o? the service on the debtor of notice of the order admitting the petition, or of the alleged act of insolvency, or is satisfied by the debtor, that he is able to pay his debts, or that for any other sufficient cause no order ought to be made, the Court shall dismiss the petition.

(3.) In the present case the Court was not satisfied with the proof of the alleged acts, of insolvency and it was for this reason that the petition was dismissed.