MOHAMMAD YAR KHAN Vs. PURAN PERSHAD

JUDGEMENT

(1.) These two connected appeals arise from two applications made by the respondent under the Insolvency Act, for an order adjudging the appellants as insolvents. He claims to be a creditor under a promissory note, dated 15 May 1929, said to have been executed by the two appellants. The latter executed a sale-deed on 9 September 1931, in favour of their wives in lieu of their dower debts. Thereupon the respondent made two applications one against each of the appellants on the same date for the insolvency of the two debtors who are brothers. The respondent was absent on the day the case was taken up by the Court of first instance, which dismissed the application not for non-appearance, but on the merits. The respondent preferred an appeal in the Court of the District Judge, Moradabad who reversed the order of the first Court and adjudicated the appellants as insolvents. The present appeals are from the order of the District Judge.

(2.) It is argued that, in the absence of a finding that the appellants committed an act of insolvency, no order of adjudication could be passed. The learned District Judge has found that the appellants are indebted in sums exceeding Rs. 500; but he has not arrived at any definite finding as to whether they committed any act of insolvency. Section 9, Provincial Insolvency Act, prohibits a creditor from making an application for insolvency inter alia, where the debts do not amount to Rs. 500 or more. It does not however follow that if the debts exceed that amount, a creditor is necessarily entitled to make an application for insolvency. The condition required by Section 7 must also be fulfilled. That section provides that if a debtor commits an act of insolvency, an insolvency petition may be presented either by a creditor or by a debtor. It follows that the second condition which must be present before an application made by a creditor for insolvency can be entertained is that the debtor committed an act of insolvency. Section 6 lays down what amounts to an act of insolvency. None of the clauses other than (b) and (c) of that section are said to be applicable to the circumstances of this case. There is no finding by the lower appellate Court that the appellants made a transfer of their property or any part thereof with intent to defeat or delay their creditors, or that they made any transfer of their property or any part thereof which would, under the Provincial Insolvency Act., or any other enactment for the time being in force be void as a fraudulent preference, if they were adjudged insolvents. The learned Judge has referred to the sale made by the appellants in favour of their wives and remarked that: Transfer of one's tangible property to wife in lieu of dower is always suspect.

(3.) Before adjudicating the appellants as insolvents, the learned Judge should have definitely found, as was alleged by the respondent, that the sale in question amounted to a fraudulent preference. In the absence of such finding, the order of adjudication, passed by the lower appellate Court was not justified. I allow this appeal set aside the order of the lower Court and remand the case to that Court for disposal according to law. Costs shall abide the result.