BINDESHARI PRASAD Vs. BISO SINGH

JUDGEMENT

(1.) The appellant Bindeshri Prasad is Liquidator of the Garobigha Cooperative Society in the Gaya district having taken charge on 2 May, 1932. He afterwards took out a certificate at Nawadah against Biso Singh, a member of the society. Meanwhile Biso Singh, on 26 January 1933, had filed an application for being declared insolvent giving the society as his sole creditor. He did not mention that the society was under liquidation and was declared insolvent without the knowledge of the liquidator. On 8 November 1933 the insolvent filed an application before the Certificate Officer to the effect that the certificate could not proceed against him, and the liquidator then approached the District Judge of Gaya for annulment of the insolvency under Section 35, Insolvency Act, on the ground that by fraud of the insolvent no notice had been served upon him, and that the insolvent had concealed assets. He also applied for the prosecution of the insolvent. The District Judge rejected the application, and the liquidator has now appealed under Section 75 of the Act, valuing his application at the sum of Rs. 2,149.

(2.) The learned District Judge rejected the liquidator's application on the ground that even if the insolvent had concealed part of his assets, still witnesses of the liquidator had admitted that at present it is difficult to sell immoveable properties, and it could not therefore be said that the insolvent was able to pay his debts even if he had concealed property. This cannot be accepted as an adequate disposal of the matter. In the lower Court the liquidator filed four mortgage bonds of the year 1927 and 1928, whereby the insolvent as karta of a joint family mortgaged substantial properties to the Co-operative Society as security for his debts. It appears that only a share in these properties have now been shown by the insolvent as available to the creditor, and this is a matter for which the insolvent should be called on to account. Also we are aware that Cooperative Societies maintain a haisiyat register, or register of properties and debts of the members of the society, and that register, if produced, should show by what representations the insolvent obtained his loans from the society, and how far those representations were consistent with the position taken by him before the Insolvency Court. In Ganesh Lal Sarawgi V/s. Sanehi Ram AIR 1933 Pat 43 it is observed: There has been a tendency for Courts administering the Insolvency Act to believe that the hearing of a petition is a more or less formal matter and that if the petition is as it were merely verified by the evidence of the debtor the Court is bound to accede to the petition. That is not the case. It is the duty of the Court to be satisfied prima facie and after following the necessary procedure and making the necessary investigation to come to a conclusion that the statements by the debtor are true. After all the procedure of insolvency is for the protection of creditors quite as much as for the protection of debtors. It is unfortunately more often used by debtors than by creditors with the consequence that the interest of the creditor has a tendency to be forgotten.

(3.) Under Section 35, Insolvency Act, the Court is bound to annul a declaration of insolvency if a person interested is able to show that the debtor ought not to have been adjudged insolvent. I would remand this case for a decision as to how far the insolvency application in this case was honest and bona fide, and whether the insolvent is a person entitled to the protection of the Insolvency Act. Parties will bear their own costs in this Court. Agarwala, J.