Back
Andhra Pradesh High Court
Judges : A.L.VAIDYA
Pydimarri Venkateswarlu - Appellant
Versus
Pydimarri Jalamma - Respondent
Decided On : 09-06-67
INSOLVENCY - ACT OF INSOLVENCY - TRANSFER OF PROPERTY - FRAUDULENT PREFERENCE - SECTION 6(A), (B), (C) OF THE PROVINCIAL INSOLVENCY ACT - INTERPRETATION AND APPLICATION.
Fact of the Case:
The petitioner, a debtor, executed a sale deed transferring his only property to a third person with the intention of paying off his creditors, including the respondent. However, the respondent, who was also a creditor, was not paid as the petitioner disputed the genuineness of the promissory note executed in her favor.
Finding of the Court:
The trial court held that the promissory note was not genuine and dismissed the insolvency petition. The appellate court reversed the trial court's decision, holding that the promissory note was genuine and that the sale deed amounted to an act of insolvency under Section 6 of the Provincial Insolvency Act.
Issues: 1. Whether the promissory note executed by the petitioner in favor of the respondent was genuine. 2. Whether the sale deed executed by the petitioner was an act of insolvency under Section 6 of the Provincial Insolvency Act.
Ratio Decidendi: 1. The court held that the findings of fact made by the lower courts, including the finding that the promissory note was genuine, were binding on it and could not be assailed in revision. 2. The court interpreted Section 6(a), (b), and (c) of the Provincial Insolvency Act and held that: a) Clause (a) applies only to cases where a debtor transfers all or substantially all of his property to a third person for the benefit of his creditors generally, and not to cases where the transfer is made to a single creditor. b) Clause (b) applies only to cases where a transfer is made with the intent to defeat or delay all of the debtor's creditors, and not to cases where the intent is to defeat or delay a single creditor. c) Clause (c) applies only to cases where a transfer is void as a fraudulent preference under Section 54 of the Act or Section 52 of the Transfer of Property Act, and not to cases where the transfer is not void under these provisions. 3. The court held that the sale deed executed by the petitioner did not fall within any of the clauses of Section 6 and, therefore, did not amount to an act of insolvency.
Final Decision: The revision petition was allowed, the judgment of the appellate court was set aside, and the order of the trial court dismissing the insolvency petition was restored.
( 1 ) THIS revision petition arises out of I. P. 12/61 on the file of Sub-Court, Kavali, an insolvency petition filed by the respondent against the petitioner.
( 2 ) THE allegations in the petition are that the petitioner executed a promissory note for a sum of Rs. 3950 on 27-10-1959 in favour of the respondent comprising of Rs. 3500 paid by the respondent in cash before the Sub-Registrar and the balance of Rs. 450 subsequently taken by the petitioner from the respondent. It was agreed at the time of execution of the promissory note that the petitioner will not alienate the schedule mentioned property, Contrary to that the petitioner alienated the schedule mentioned property in favour of several persons including one Satyanarayana and others. The respondent believes it to be true that the property was also sold in auction several times. The petitioner except the house at Kanigiri and the same is worth Rs. 12,000 and he owes debts to the tune of Rs. 16,000 to Rupees 17,000 to the creditors.
( 3 ) THE petitioner is unable to discharge the same and has been making an attempt to screen his properties in the name of his partisans. The respondent learns and believes it to be true that the petitioner has sold the schedule mentioned house at Kangiri under a registered sale deed dated 20/04/1961 in favour of his natural brother Pydimarri Bala Venkata Subbaiah fraudulently and with a view to delay and defraud the creditors. It was also alleged that the sale was without any consideration. The recitals therein that the respondent was being paid Rs. 4200. 00 and respondents husband Rs. 1500 by the vendee. are all not true or correct. The other debts mentioned in the document are also not true. The respondent therefore, submitted that the petitioner had committed on act of Insolvency under S. 6 of the Provincial Insolvency Act (hereinafter referred to as the Act) having transferred the only property owned by him or a substantial portion of his property and is, therefore, liable to be adjudicated insolvent.
( 4 ) THE petitioner in his counter denied that he borrowed a sum of Rs. 3950 from the respondent. He admitted that the executed a promissory note for Rs. 3950, in favour of the respondent but that promissory note was merely nominal and not intended to be operated. As the petitioner was indebted to others and was in difficult circumstances, the respondents husband advised him to execute a promissory note for a sum of Rs. 3950 in favour of the respondent and another promissory note for Rs. 1000 in favour of the respondents husband with a view to enhance the amount of petitioners indebtedness and obtain rateable distribution against the creditors. It was also stated that the respondent had no capacity to lend any amount to the petitioner. The insolvency petition, it was alleged, was not maintainable as the respondent was not a creditor of the petitioner. The sale deed executed by the petitioner on 20/04/1961 is not devoid of consideration. The house was sold by the petitioner for Rs. 11,000 with a view to discharge his debts. After three months of sale, out of the sale amount, the petitioner paid all the debts and got several decrees satisfied. As the petitioner was absent at the time of writing the sale deed, the vendee got the sale deed written with several incorrect recitals. The petitioner did not read the document in that hurry and simply signed it. Later on the petitioner came to learn that it was recited wrongly in the document that the respondents alleged debt of Rs. 4200 was also paid by the vendee to the respondent. The petitioner issued a notice to the vendee about this wrong recital. The present petition has been filed by the respondent with a view to harass and annoy the petitioner. The insolvency petition has not been filed for the benefit of the petitioners creditors. The petitioner also contended that the sale deed is not and cannot be fraudulent preference and that the case of the respondent was quite incons
AI
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
