RAJENDRA PRASAD TEWARI Vs. NAGESHWAR UPADHYA

JUDGEMENT

(1.) This is an appeal against the order of the District Judge of Muzaffarpur adjudicating the opposite party insolvent on their own petition. The creditor who is the appellant now before this Court objected to the adjudication on the ground that the petitioners had failed to disclose the whole of their property and that they had included in their petition fictitious debts for which no consideration had passed. A large part of the property which the creditors claimed to be available for the purpose of paying the petitioners debts had been ostensibly transferred by three deeds of sale which the creditors impugned as fictitious. The property had been attached in execution of certain decrees, whereupon a claim had been made by the ostensible creditors under Order 21, Rule 58 which had been allowed. The District Judge considered that he could not enter into the question of whether this property was really available to the petitioner unless the decree-holder instituted a suit under Order 21, Rule 63 to set aside the summary decision under Rule 58. For other property which had been attached in execution a claim had been made on behalf of two persons named as secured creditors in this petition, praying that their incumbrances might be notified. The creditors attacked the deeds creating these incumbrances as mere farzi transactions; but the incumbrances had been notified in the execution proceeding. The District Judge found, himself unable to enter into these questions so long as there was no decision of a competent Court on the matter, and he therefore made an order of adjudication, since the debts in the petitioners schedule exceeded the value of the assets disclosed.

(2.) The learned advocate for the insolvent suggests that it is not proper before adjudication to enter into these questions which are more properly considered at the time when the insolvent applied for a discharge.

(3.) In support of this argument he relies on the decision in Chhatrapat Singh v. Kharag Singh Lachmiram A.I.R.1916. P.C. 64 where this rule was laid down; but that decision was under the old Provincial Insolvency Act which was amended in 1920, four years after the date of the decision on which the learned advocate relies. Proceedings in insolvency in this country ordinarily bear a curiously inverted aspect from the English point of view; and it was found necessary in 1920 to amend the earlier Act which had been passed on the assumption that nobody would apply to be made insolvent unless he were incapable of paying his debts. But a large proportion of applications in insolvency made by debtors under the Provincial Insolvency Act are made for the purpose of evading payment of debts; and we find debtor, instead of anxiously endeavouring to avoid being declared bankrupt, trying hard to be declared insolvent for the evasion of payment of debts, while the creditors, who find that evasion is less easy under the regular procedure of the Civil Courts, resist the endeavour of their debtors to have themselves declared insolvents. The present case appears to be one of this class The suit under Order 21, Rule 63 has now been decided; and it has been held that the sales which the creditors impugned were fictitious. The Subordinate Judge has also found that the mortgage transactions which the creditors also impugned were fictitious; but he has given no formal declaration to the plaintiffs of that suit on that point. The learned advocate for the petitioner in insolvency suggests that no action can be taken on this decision because it is subject to appeal, though so far as we are informed no appeal has yet been filed; but so long as that decision is not reversed in appeal we must treat it as binding, and we must hold that the property which the petitioner in insolvency purported to convey by the sale deeds was actually available for the payment of his genuine debts, and that it ought to have been contained in the schedule attached to the (petition of insolvency. 5. For the two mortgages, Rs. 2985 and Rs. 2000 respectively, the finding of the Subordinate Judge does not amount to res judicata; but we have in that matter the evidence of Ramji Sukul on behalf of the objecting creditors, who says that these two mortgages were really bogus transactions executed after a panchaiti had been held to settle the question of the payment of the objecting creditors debts. The ostensible creditors Nakched Misir and Rampargash Pande who were parties to the inquiry which preceded the adjudication did not appear to defend these transactions which the objecting creditors impugned, and it may be inferred that these are not real debts. If we assume that the 16 bighas odd which the petitioner in insolvency purported to convey by the sale deeds which have been found to be farzi, were of substantially the same value as the land mortgaged to the objecting creditors, and add the four bighas which remained in the possession of the petitioner we have the sum of Rs. 9000 to be added to the value of the assets. This with the value of the house and banswari and the bagicha which have also been omitted, bring the value of the assets to Rs. 22,494. The amount of his debts are placed by the petitioner at Rs. 23,692. Several of these debts are attacked by the objecting creditors, but assuming that they are all genuine except the mortgage debts to Nakched Misir and Rampragash Pande the liabilities are reduced to Rs. 18,707; so that the assets considerably exceed the liabilities and the petitioner is able to pay his debts. In these (circumstances, as the objecting creditors; prefer to avail themselves of the ordinary law for the satisfaction of their dues, I consider that this appeal ought to be allowed, and that the adjudication of the petitioner in insolvency should be annulled and the appeal be allowed with costs. Agarwala J. 8. I agree. The adjudication is annulled and the appeal is allowed with costs.