Back
Andhra Pradesh High Court
Judges : AVINASH SOMAKANT BHATE
Dandamudi Chakradhararao - Appellant
Versus
Pidikiti Koteswararao - Respondent
Decided On : 03-06-96
INSOLVENCY ACT - SECTIONS 6, 9 - PROVINCIAL INSOLVENCY ACT - ACT OF INSOLVENCY - TRANSFER OF PROPERTY WITH INTENT TO DEFEAT OR DELAY CREDITORS - EXISTENCE OF OTHER PROPERTIES - ADJUDICATION AS INSOLVENT - CONDITIONS.
Fact of the Case:
Petitioner filed an insolvency petition against respondent No. 1 alleging that he borrowed Rs. 6,000/- and executed a pronote, and that the sale deed executed by respondent No. 1 in favor of respondents 2 and 3 for Rs. 18,000/- was a sham transaction to defraud creditors. Respondents 2 and 3 resisted the claim, contending that the pronote was not genuine, respondent No. 1 had other properties, and the sale deed was a genuine transaction for valuable consideration.
Finding of the Court:
The trial court held in favor of respondents 2 and 3, finding that respondent No. 1 had other properties and the petitioner could realize his amount from those properties. The appellate court reversed the finding and held that an act of insolvency was committed by respondent No. 1.
Issues: 1. Whether the petitioner had established the existence of a debt in his favor against respondent No. 1. 2. Whether the sale of property to respondents 2 and 3 amounted to an act of insolvency under Section 6 of the Insolvency Act.
Ratio Decidendi: 1. The court found that the petitioner failed to convincingly prove the existence of a debt in his favor against respondent No. 1. The pronote was not genuine, and the petitioner did not file a suit within the stipulated time to obtain a decree. 2. The court held that the sale of property to respondents 2 and 3 did not amount to an act of insolvency under Section 6 of the Insolvency Act. Respondent No. 1 had other properties from which the petitioner's claim could be satisfied, and the sale was not made with the intent to defeat or delay creditors.
Final Decision: The court allowed the revision petition, set aside the order of the appellate court, and restored the order of the trial court.
( 1 ) THIS revision challenges the order passed in A. S. No. 150 of 1982 by the district Judge, West Godavari at Eluru.
( 2 ) THE petitioners before this Court are respondents 2 and 3 in the Insolvency petition which was filed by respondent No. 1 in this revision. Respondent No. 2 in this revision was originally the respondent No. 1 in the original petition. Parties shall be referred to as per their status shown in the original petition.
( 3 ) THE petitioner Koteswara Rao had filed Insolvency Petition in the Court of Subordinate Judge, Eluru against respondent No. 1 Satyanarayana. The said petition was under Section 9 of the provincial Insolvency Act hereafter referred to as insolvency Act . In the said petition it was contended that Respondent no. 1 borrowed a sum of Rs. 6,000/- by executing a prohote on 26-03-1974 for expenses of the marriage of his daughter. He agreed to repay the amount with interest at 12% p. a. It is alleged that on 5-3-1977 a part payment of Rs. 1,000/- was made by respondent No. 1 to the Petitioner on demand. The balance remained unpaid. It was contended that respondent No. 1 had no property except one which he sold to respondents 2 and 3 by a sale deed dated 19-9-1977 for consideration of Rs. 18,000/ -. It was also alleged that the said property was worth more than Rs. 40,000/ -. However, the petitioner contended that the said sale deed was sham, nominal and collusive and no consideration passed under it. It was brought into existence only to defraud and delay the genuine creditors like the petitioner. It was alleged that the purchasers and attestors to the said sale deed were relatives and close associates of the first respondent. It was therefore contended that the said sale deed may be annulled under Sections 53 and 54 of the Provincial Insolvency Act. The real prayer was that the 1st respondent committed an act of insolvency and be adjudicated as an insolvent for the benefit of general body of creditors.
( 4 ) RESPONDENT No. 1 against whom adjudication was sought remained ex pane.
( 5 ) RESPONDENTS 2 and 3 resisted the claim by filing a counter at the hands of 2nd respondent which was adopted by 3rd respondent. It was alleged that respondent No. 1 and the petitioner were close relatives. They were ill-disposed towards respondents 2 and 3. The pronote set up by the petitioner was not a genuine document and was brought into existence only to deprive respondents 2 and 3 of property purchased by them. It was denied that respondent No. 1 had repaid any amount of Rs. 1,000/- to the petitioner on 5-3-1977. further it was pointed out that first respondent was owning and possessing a terraced building at Pedapadu Village worth more than Rs. 30,000/- and was also having a site. The petitioner was aware of all these facts and in spite of this he did not file any suit for claiming his debt on the basis of the pronote. It was further pointed out that the property purchased by respondents 2 and 3 was subject to a charge of maintenance and respondents 2 and 3 were required to pay the said amount annually to the decree-holder of that maintenance. The decree-holder was wife of respondent No. 1. It was thus contended that 1st respondent was not at all indebted to the petitioner, and had not committed any act of insolvency and there was no necessity of adjudicating him as an insolvent.
( 6 ) THE Subordinate Judge held in favour of the respondents 2 and 3 and further held that respondent No. 1 had other properties and the petitioner could realise his amount from the other properties of the 1st respondent and therefore there was no occasion to adjudicate respondent No. 1 as insolvent. The Court also held that the transaction entered by respondent No. 1 with respondents 2 and 3 on 19-9-1977 was genuine sale transaction for valuable consideration.
( 7 ) HOWEVER, the District Judge, West Godavari in appeal preferred against the Judgment of the subordinate Judge, reversed the finding and held th
An indispensable Tool for Legal Professionals, Endorsed by Various High Court and Judicial Officers
Please visit our Training & Support
Center or Contact Us for assistance
Scan Me!
India’s Legal research and Law Firm App, Download now!
For Daily Legal Updates, Join us on :
Back to top
