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1977 Supreme(AP) 293

Andhra Pradesh High Court
Judges : A.GANGADHARA RAO
Pathuri Dharma Rao - Appellant
Versus
Vatluru Co-operative Bank - Respondent
Decided On : 10-10-77

A debtor is entitled to be adjudicated insolvent if he satisfies the conditions specified in the Provincial Insolvency Act, and the court cannot deprive him of this right on the ground that his petition is an abuse of process.

Headnote:

{'KEYWORD': 'Insolvency', 'SUBJECT': 'Adjudication of Insolvency', 'ACT SECTION LIST': ['Provincial Insolvency Act, S. 6', 'Provincial Insolvency Act, S. 10', 'Provincial Insolvency Act, S. 24'], 'SUMMARY': 'The court held that a debtor is entitled to be adjudicated insolvent if he satisfies the conditions specified in the Provincial Insolvency Act, and that the court cannot deprive him of this right on the ground that his petition is an abuse of process. The court further held that the mere fact that the debtor has large properties is no ground for holding that he is able to pay his debts, and that the court should not inquire into the bona fides of the insolvent until he comes up for discharge.'}

Fact of the Case:

The petitioner, a debtor, filed a petition under S. 10 of the Provincial Insolvency Act to declare him an insolvent on the ground that he was unable to pay his debts. The respondents, who were creditors of the petitioner, resisted the petition, contending that the petitioner had suppressed some of his assets and that he had the capacity to pay the debts.

Finding of the Court:

The court found that the petitioner had committed acts of insolvency, that he had prima facie proof of his inability to pay his debts, and that the respondents had failed to show that the petitioner had the capacity to pay the debts.

Issues: Whether the petitioner was entitled to be adjudicated insolvent.

Ratio Decidendi: The court held that the petitioner was entitled to be adjudicated insolvent because he had satisfied the conditions specified in the Provincial Insolvency Act, and that the respondents had failed to show that the petitioner had the capacity to pay the debts.

Final Decision: The court allowed the revision petition and remitted the matter to the Subordinate Judge for disposal.

A. GANGADHARA RAO, J.

( 1 ) THE petitioner is a debtor. He filed a petition under S. 10 of the Provincial Insolvency Act, to declare him an insolvent on the ground that he was unable to pay his debts. He had borrowed monies from the respondents. The 8th respondent obtained a decree in O. S. No. 339/1970 on the file of the District Munsifs Court, Eluru and in execution of that decree, the petitioner was arrested and produced before the Court on 8-11-1971. He gave an undertaking to the Court that he would file an Insolvency Petition and he was released. The 1st respondent obtained a decree against the petitioner on the foot of a mortgage for a sum of Rs. 10,000. 00, and in execution of that decree the lands and the house of the petitioner were attached and the petitioners share in the house was sold in auction. The second respondent filed O. S. No. 136/1971 in the Court of the Subordinate Judge, Eluru on the basis of a promissory note executed by the petitioner for Rs. 15,000. 00 and obtained attachment before judgment, of his family properties. The petitioner had shown his debts in the A schedule to the petition. They come to Rs. 56,652. 00. He had shown his properties in the B schedule. They are Ac. 4-861/2 cents. He estimated their value at Rs. 5,600. 00.

( 2 ) THE respondents resisted the petition by contending that the petitioner is the manager of the joint family since the death of his father in 1949, and the joint family owns properties of an extent of Ac. 45-76 cents, and most of the debts shown in the A schedule are concocted for the purpose of the petition. The petitioner has admitted in the cross-examination that his family owned Ac. 50-00 of land, and he gave security of Ac. 26-30 cents for the sum of Rs. 10,000. 00 borrowed from the 1st defendant. He also admitted that his father gave Ac. 80-00 of land to him and to his other three brothers. He admitted that he had got 1/4th share in the property, but he had not shown it in the petition schedule. He contended that he and his brothers had divided the joint family properties in 1956, but that was not believed by both the lower Courts in view of the documents, Exs. B-2 to B-4. Thus, both the Courts held that the petitioner had suppressed to mention all the properties in the petition. The Insolvency Court held that Rs. 30,000. 00, out of the debts shown by the petitioner, had to be paid jointly by the petitioner and his brothers. It further observed that even if the petitioner alone has to pay the balance of Rs. 26,652. 00, his 1/4th share of Ac. 43-22 cents and 1/4th share in the house property was sufficient to discharge that amount. On the ground that he had failed to fully disclose his assets and his assets were more than his liabilities and he had the capacity to pay the debts, the Insolvency Court dismissed the petition. Those findings were confirmed in appeal by the District Judge, West Godavari.

( 3 ) IT is submitted by the learned counsel for the petitioner that there is no clear finding that the value of his assets is more than his debts. I do not agree. If we read the judgment of both the lower courts as a whole, that is the conclusion they have arrived at,

( 4 ) NEXT it is submitted that in a debtors petition the debtor has to furnish only prima facie proof of his inability to pay the debts under S. 24 of the Provincial Insolvency Act, and the petitioner had adduced such a proof. It is further stated that in execution of a decree his share in the house was sold, in another suit his property was attached before judgment, and in a third suit in execution of the decree he was arrested and these are sufficient to show that he had no means to pay the debts.

( 5 ) IN order to appreciate this question it is necessary to refer to the relevant provisions of the Provincial Insolvency Act. Under S. 6, a debtor commits an act of insolvency, if any of his property has been sold in execution of the decree of any court for the payment of money, or if he petitions to be adjud





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