GANGU VEERABRAHMAM Vs. GANGU JAGANNADHACHARYULU

JUDGEMENT

(1.) The appeal is by a creditor against the dismissal of his petition to have the respondents, his debtors, adjudicated insolvent. Three acts of insolvency were alleged in the petition. But the only one with which we are concerned with in this appeal is under Section 6(g) of the Provincial Insolvency Act, namely, that the debtor gave notice to a creditor the petitioner, that he had suspended or was about to suspend payment of his debts.

(2.) It appears from the counter-affidavit filed by the first respondent, which in its material particulars is adopted by the second respondent, that the debtors are artisan goldsmiths and that they had incurred debts amounting to Rs. 2,400, of which a sum of Rs. 1,040 represented a mortgage debt on their property. In order to meet their creditors the respondents sold their property and offered to make a rateable distribution among their unsecured creditors, after satisfying the mortgage-debt, of the balance of the sale proceeds. The amount so available for distribution was three annas nine pies in the rupee for each creditor. The petitioner in his affidavit says that the respondents "have intimated to the petitioner their intention of not paying anything to this petitioner unless the petitioner agrees to accept in full settlement the small amount which they "offered". This allegation is not disputed in the counter-affidavit of the respondents nor was any evidence called to disprove it.

(3.) The question is, what was the effect of this intimation given by the respondents to the petitioner. The learned District Judge has correctly stated the proposition, but he has failed to apply the proper test for determining it. The true test, as stated in Crook V/s. Morley (1891) A.C. 316 is, what effect would the notice produce on the mind of a creditor receiving it as to the intention of the debtor with regard to his creditors? Would it convey to the creditor that the debtor was about to stop, payment or had stopped payment? In the same case, Lord Watson referring to the provision in the English Bankruptcy Act, which is identical in terms with Clause (g) of the Provincial Insolvency Act, said: It appears to me that any notice will be sufficient...which is expressed in terms calculated to convey to its recipients the information that their debtor has suspended or is about to suspend payment of his debts. A declaration of his inability to pay his debts may be made by a debtor to one or more of his creditors, in terms and under circumstances which do not suggest that he means to stop payment of his debts as they fall due. But that such a declaration may be couched in language which clearly implies that the debtor means to pay nobody in full, and to place his assets at the disposal of his creditors, does not appear to me to be doubtful.