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1981 Supreme(Mad) 123
Madras High Court
NATARAJAN,SENGOTTUVELAN
Structee Mech India, Partnership firm - Appellant
Versus
Bharatkumar Pahlajrai - Respondent
Decided On : 03/18/1981
G. Nandalal, for Appellants; K.N. Balasubramaniam and T. Dhanuakumar, for Respondents.
An act of insolvency under Section 9(g) of the Presidency Towns Insolvency Act, 1909, can be committed by a partner on behalf of the firm, even without the express authority of the other partners, if the circumstances warrant such a conclusion.
Headnote:
PRESIDENCY TOWNS INSOLVENCY ACT - ACT OF INSOLVENCY - SUSPENSION OF PAYMENTS - INTERPRETATION - PARTNERSHIP FIRM - LIABILITY OF PARTNERS - JOINT ACT OF INSOLVENCY - AUTHORITY OF PARTNER TO BIND FIRM - SECTION 9(G).
Fact of the Case:
A partnership firm and its partners were alleged to have committed an act of insolvency under Section 9(g) of the Presidency Towns Insolvency Act, 1909, by sending letters to creditors stating that payments were being suspended. The appellants, who were partners in the firm, challenged the order of adjudication passed against them, contending that the letters were not written with their consent, that the suspension of payments was not intended to apply to all creditors, and that the amount due to the petitioning creditors was not immediately payable.
Finding of the Court:
The court found that the letters were written by the fourth appellant with the knowledge and participation of the third appellant, and that the use of the plural term 'we' in the letters indicated that the suspension of payments was an expression made by all the partners of the firm. The court also found that the amount due to the petitioning creditors was immediately payable and that the suspension of payments was intended to apply to all creditors.
Issues: 1. Whether the letters written by the fourth appellant constituted an act of insolvency under Section 9(g) of the Presidency Towns Insolvency Act, 1909? 2. Whether the suspension of payments was intended to apply to all creditors? 3. Whether the amount due to the petitioning creditors was immediately payable?
Ratio Decidendi: 1. The court held that the letters written by the fourth appellant constituted an act of insolvency under Section 9(g) of the Presidency Towns Insolvency Act, 1909, as they were written with the knowledge and participation of the third appellant, and the use of the plural term 'we' in the letters indicated that the suspension of payments was an expression made by all the partners of the firm. 2. The court held that the suspension of payments was intended to apply to all creditors, as the letters were sent to several creditors and there was no evidence to suggest that the suspension was limited to a particular class of creditors. 3. The court held that the amount due to the petitioning creditors was immediately payable, as the appellants had admitted in their evidence that the last two instalments to the petitioning creditors were fully payable and had to be made on specific dates.
Final Decision: The appeal was dismissed.
NATARAJAN, J .:- Respondents 1 to 5 in I.P. No.72 of 1976, have preferred this appeal to canvass the correctness of the order of adjudication passed against them in the said insolvency petition.
2. The first appellant is a registered partnership firm and appellants 2 to 5 are its partners. Respondents 1 to 3 herein filed a petition under S.9(d)(ii) and 9(g) read with Ss.10, 11 and 13 of the Presidency Towns Insolvency Act (III of 1909) (hereinafter referred to as the Act) for adjudicating the appellants and one Job Simon (the 6th respondent in the insolvency petition) as insolvents and for directing the estate of the insolvents to vest in the Official Assignee for purposes of administration for the benefit of the general body of creditors. As regards the act of insolvency under S.9(d)(ii), it was alleged in the petition that the appellants and the said Job Simon had made themselves unavailable for being contacted at the office or at the works. This contention was not accepted by the learned single Judge who disposed of the insolvency petition and hence we need not deal with that aspect of the matter in this judgement. As regards the other ground on which an order of adjudication was sought for, viz., under S.9(g) of the Act, it was stated by respondents 1 to 3 that the appellants owed them a sum of Rs. 6,000/- in the aggregate and the said sum besides being a liquidated amount was also payable immediately. But in spite of it, in response to the attempts made by them through their representative Mr. Motiram to collect the outstanding amount, the first appellant had sent a letter on 21-6-1976 wherein it was stated that the appellants were suspending payments for the present to all the creditors in view of the fact that they had suffered misfortunes. This ground was found to be a sustainable one by the learned single Judge and hence he allowed the petition and passed an order of adjudication against appellants 1 to 5. In so far as Job Simon, the sixth respondent in the insolvency petition is concerned, it was held that he was not a partner of the firm but was only a manager and he cannot be deemed to have committed any act of insolvency. In that view of the matter, the petition was dismissed as against Job Simon. The appellants have preferred this appeal to assail the correctness of the order of adjudication passed against them.
3. Mr.G. Nandalal, learned counsel for the appellants, contended that the order of adjudication passed against the appellants cannot be legally sustained because the appellants cannot be deemed in law to have committed an act of insolvency falling within the ambit of S.9(g) of the Act. The principal contentions put forward by the learned counsel were as follows - (1) The letters Exs. P.5 and P.6 (Ex. P.6 being a copy of Ex. P.5) were not written by the 4th appellant of his own volition or free will but had been written him at the behest of one Motiram who was acting as the agent of the Multani Bankers from whom the appellants had borrowed moneys for the firm. It had never been the intention of the 4th appellant or any of the other partners of the firm to suspend payments as envisaged under S.9 (g) of the Act.(2) The amounts claimed to be due by respondents 1 to 3 on the date when Ex.P.5 and P.6 were written, had not fallen due and were not immediately payable and in such circumstances even if the letters manifested an intention to suspend payments, an act of insolvency cannot be deemed to have been committed. (3) The alleged suspension of payments referred to in Exs. P.5and P.6 were not intended to stop payment to all the creditors of the appellants but only to one class of creditors, viz., the Multani Bankers and (4) In any event, the letters Exs. P.5 and P.6 had been written only by the fourth appellant in his individual capacity and in the absence of proof to show that the letters had been written with the express consent of the other partners, viz., appellants, 2, 3 and 5 or under an implied au
