Back
1995 Supreme(Mad) 867
High Court of Judicature at Madras
THE HONOURABLE MR. JUSTICE S. S. SUBRAMANI
Kumarathal - Appellant
Versus
Balasubramania Gounder and Others - Respondents
C.R.P. No. 1507 of 1988
Decided On : 20 October 1995
A debtor seeking adjudication as insolvent under the Provincial Insolvency Act, 1920 must provide prima facie evidence to establish their inability to pay debts, and the court has a duty to examine the evidence and determine whether the debtor has met this requirement.
Headnote:
PROVINCIAL INSOLVENCY ACT, 1920 - SECTION 10, 13, 24 - INSOLVENCY PETITION - REQUIREMENTS AND PROOF - DEBTOR'S INABILITY TO PAY DEBTS - PRIMA FACIE EVIDENCE - COURT'S DUTY TO EXAMINE - JURISDICTION.
Fact of the Case:
Petitioner obtained a decree against the first respondent, who filed an insolvency petition claiming to be an agriculturist with no source of income other than seasonal rains, incurring losses due to monsoon failure, and having debts exceeding assets. The petitioner challenged the legality of the adjudication of insolvency.
Finding of the Court:
The court found that the first respondent failed to prove his inability to pay debts and that there was a lack of evidence to establish a prima facie case for insolvency. The court also held that the lower courts erred in assuming that the mere presentation of the petition and the statement of willingness to surrender assets were sufficient proof of insolvency.
Issues: 1. Whether the first respondent proved his eligibility to present an insolvency petition. 2. Whether there was sufficient evidence to establish a prima facie case for insolvency. 3. Whether the lower courts erred in their interpretation and application of the Provincial Insolvency Act, 1920.
Ratio Decidendi: 1. The court held that the first respondent failed to provide sufficient evidence to prove his inability to pay debts, as required under Section 10(1) of the Provincial Insolvency Act, 1920. 2. The court emphasized the need for prima facie evidence to support the debtor's claim of insolvency, beyond mere repetition of the statutory language in the petition and evidence. 3. The court found that the lower courts erred in their interpretation of the Act by assuming that the presentation of the petition and the statement of willingness to surrender assets were sufficient proof of insolvency, without considering the requirement of prima facie evidence.
Final Decision: The court allowed the revision petition, set aside the orders of the lower courts, and dismissed the insolvency petition.
This revision is against the concurrent. finding of the Courts below whereby the first respondent herein was adjudicated as insolvent. The legality of the said finding is challenged in this revision.
2. The material averments are, what the petitioner herein obtained a decree against the first respondent herein in O.S. No. 243 of 1978, on the file of the District Munsif's Court, Pollachi and on the date of the filing of the insolvency petition, a sum of Rs. 13,467.75 p. was due to her.
3. In the execution of the said decree, the petitioner herein attached the properties of the first respondent, and when the property was, brought for sale, the insolvency petition was filed by the first respondent herein, to adjudicate him as an insolvent. In that petition, he has stated that he is an agriculturist and that he has no source of income. He is the owner in possession of B Schedule property, owing an area of nearly ten acres, with a newly dug well and also a 5 H.P. Motor. It is said therein that he depends only on seasonal rains and that he is incurring loss every year due to failure of monsoon. It is also stated that due to failure of monsoon, he had to borrow heavily from outside. .A' Schedule contains the debts. First Item in A Schedule is the decree debt obtained by the petitioner herein. The second item is said to be a debt due to the second. respondent in a sum of Rs. # 50,000/- under three promissory notes. # He has stated in that petition that the respondents therein are pressing for payment of their dues, but he is not in a position to discharge his debts. He has said that his assets are far less than the debts due by him to his creditors, and in such circumstances, he wanted himself to be adjudicated as an insolvent.
4. The petitioner herein filed a counter stating that the application is an abuse of process of Court and the same is liable to be dismissed in limine. It is said that he has got a source of income, and the income from the B .schedule property alone comes to more than Rs. 1lakh. It is also said that he has not disclosed his other assets, and that the debt alleged to be due to the second respondent is a fictitious debt, and in fact, the second respondent is a close relative of the petitioner and that the insolvency petition was a collusive one between the two, and the claim made by the petitioner is bogus. Ultimately, revision petitioner herein said that the petitioner was not entitled to be adjudicated as an insolvent.
5. During trial, the first respondent herein got himself examined as PW 1. No other witness was examined. In his deposition, the first respondent has stated that the petitioner herein had obtained a decree, and in so far as the second respondent is concerned, he has. borrowed a sum of Rs. 50,000/- on three occasions by executing three promissory notes, i.e., Rs. 15,000/- was borrowed twice and a sum of Rs. 20,000/- was borrowed under another promissory note. He said that the total value of the assets will be around Rs. 25,000/- and in the well, there is no water, and he is not in a position to pay the debts. He said that his annual income will be Rs. 1500/-. He also denied the suggestion that he has disclosed bogus debts. He has also said that he has no building of his own and that he has no asset anywhere. In his cross-examination, he has said that the land value per acre will be about Rs. 2,000/- to Rs. 3,000/-- and there is a well in his property. He has also said that there is a motor and there are about 400 coconut trees. So far as the second respondent is concerned, he said that it must be either in 1983 or 1984 that he borrowed the amounts and he made the borrowing even before the attachment. He admitted that the second respondent is his relative. In re-examination, he said that the 400 coconut trees are not yielding.
6. It is on the basis of the above evidence, the courts below held that the first respondent herein is entitled to get himself adjudicated as an insolvent.
7. Section 1
