SRINIVASULU NAIDU Vs. SUNDARESA IYER

JUDGEMENT

(1.) The petitioner filed a suit against the respondent on a promissory note. That suit was dismissed by the lower Court. Certain facts must be stated. The suit debt was incurred on 9th December 1931. Before that, on 11 October 1931, the respondent had filed his own petition to be adjudicated as an insolvent and he prosecuted that petition and on 21 November 1932 was adjudicated. Ha was given one year's time to apply for discharge and at the end of that time applied for discharge and an order of discharge was granted conditional on payment by him of one anna in the rupee. This condition he satisfied. Thereafter, the petitioner filed this suit against him. In his written statement the defendant stated that the plaint was false and vexatious and had not been properly presented and that the plaintiff had fraudulently, with knowledge of the insolvency, presented the plaint with a deficient stamp and was proposing terms to which the debtor did not consent. He then pleaded his insolvency and that he had obtained an order of discharge on 30 June 1934 and had also complied with the condition imposed in that order, and that as the debt was one provable in the insolvency he had been released in respect of his liability to it by reason of his discharge. The question here is whether the suit debt was incurred by means of fraud. If it was, then by reason of Section 44(1)(b) of the Act, the order of discharge did not release the insolvent from liability in respect of it. The petitioner's case was that on the date of the promissory note when he advanced the money to the defendant, the defendant concealed from him the fact that he had presented an insolvency petition praying for his own adjudication; and whether it was definitely pleaded or not, it is perfectly clear that no reasonable man--and I assume the plaintiff to be such--would have advanced the loan, had he been aware of the presentation previously of the insolvency petition; and the lower Court's judgment proceeds upon the basis that the plaintiff did not know anything of the insolvency proceedings.

(2.) The question here is whether this was a debt which was incurred by fraud. It seems to me to be quite clear that there was a fraud for the reason that the plaintiff parted with his money not having been told of a very material circumstance. The question is whether the concealment of that material fact by the defendant was with an intention of so defrauding the plaintiff. It is impossible to look into the mind of any one and gather from it what his intention was. That has to be found from his own conduct at the time and before and after. In the present case, at the risk of repeating myself, I remark that the petition fee adjudication was the debtor's own petition. Although the petition is not before me, I must take it that the requirements laid down in Section 13 of the Act as regards the form of such petitions were complied with and the first particular to be set out in the insolvency petition is of importance. Section 13(1) says: Every insolvency petition presented by a debtor shall contain the following particulars, namely: (a) a statement that the debtor is unable to pay his debts; . . . .

(3.) I take it that the petition contained that statement and that if it had not, it would have been returned to the respondent in order that the necessary particulars should be set out; and in fact it has not been argued here by the respondent that that allegation was omitted from the petition. Therefore, less than two months before this loan was got by the defendant from the plaintiff, he had stated that he was unable to pay his debts. The fact that he had presented a petition was concealed from the lender and it follows that the fact that borrower was unable to pay his debts was also concealed from the lender. What is it reasonable to assume was in the defendant's mind when he presented his petition? It is that he wanted the protection of the insolvency Court, because he was in insolvent circumstances and was unable to pay his debts. What did he do afterwards? He prosecuted his petition. Therefore not only at the time when he presented his petition did he think that he was unable to pay his debts but also all the time throughout the pendency of his petition he must be taken to have thought the same. His prosecution of the petition was successful and in fact he was adjudicated an insolvent on the allegations made in his own petition. He got his discharge within the specified time and what throws a very full light upon his financial circumstances is that it was made conditional upon his payment of only one anna in the rupee. Viewing the whole transaction from beginning to the and, it appears to me that at the time when the loan was taken from the plain. tiff, the borrower, the defendant, was in hopelessly insolvent circumstances unable to pay, as later history shows, more than one anna in the rupee. That he contracted the debt is beyond dispute. How is his subsequent conduct to be viewed as throwing a light upon what his intention was when he contracted it? He had contracted a debt admittedly. What does he do when the suit is filed against him? He deliberately accuses the plaintiff of fraud in the filing of the suit and, although he had contracted this debt admittedly and he does not allege any fraud so far as I can see on plaintiff's part in lending the money, he raises the defence that by reason of his discharge he is free from his liability to pay the debt. Reviewing the whole of the circumstances here and the history relating to the matter right from the presentation of the petition to the discharge and the filing of the written statement, it seems to me that there is a prima facie case that the loan was obtained by fraud. It was open to the defendant at the trial to go into the witness-box, and show to the Court that at the time when he contracted the debt, notwithstanding the fact that he had only a few weeks before in his insolvency petition stated that he was unable to pay his debts, he had a reasonable hope nevertheless of doing so and to explain how it was that he went on under the circumstances with his petition. He kept out of the witness-box and I think it is quite clear that he did so of his own volition because I see that in the Judge's notes of evidence it is stated "the defendant adduces no evidence".