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2009 Supreme(Mad) 3203
High Court of Judicature at Madras
THE HONOURABLE MR. JUSTICE K.K. SASIDHARAN
The Association of the Creditors of the Madras Roasted Gram Mills, Rep. by its Office Bearers & Others Versus
Krishnan
C.M.S.A.No.32 of 1998
Decided on: 18-08-2009
For the Petitioner:Malini Ganesh, Advocate.
For the Respondent:K.V. Venkatapathi, Sr. Counsel, K.V. Sundararajan, Advocate.
The insolvency petition filed by a society under the Provincial Insolvency Act must provide evidence of individual debts and the Act of insolvency to be maintainable.
Headnote:
Insolvency Petition - Societies Registration Act - Provincial Insolvency Act - Section 9, Section 13(2), Section 19, Section 6 - The court found that the insolvency petition filed by the Appellant was not maintainable both on law as well as on facts. The Appellant failed to prove the Act of insolvency and provide evidence of individual debts, leading to the dismissal of the appeal.
Fact of the Case:
The appellant, an association of creditors, filed a petition under section 9 of the Provincial Insolvency Act against the respondent, seeking to declare him insolvent and vest his properties with the official receiver or appoint a receiver for the purpose of payment to the creditors. The respondent denied the allegations and contested the proceedings.
Finding of the Court:
The court found that the appellant failed to provide documentary evidence to prove the debts owed by the respondent and the Act of insolvency, rendering the insolvency petition not maintainable.
Issues: The main issue was whether a society registered under the Societies Registration Act could maintain a petition under Section 9 of the Insolvency Act without disclosing the identity of its members and without proof of dues to individual creditors.
Ratio Decidendi: The appellant, being a society, was required to provide evidence of individual debts and the Act of insolvency to maintain the insolvency petition. The failure to produce such evidence rendered the petition not maintainable.
Final Decision: The civil miscellaneous second appeal was dismissed, upholding the lower courts' judgments and decree. No costs were awarded.
This civil miscellaneous second appeal is directed against the Judgment and Decree dated 19.01.1998 in C.M.A.No.2/2007 on the file of learned Principal District Judge, Pondicherry confirming the Judgment and decree dated 19.02.1996 in I.P.No.1/1993 in the file of the Principal Subordinate Court, Pondicherry.
Background facts:-
2. The appellant is an association of the creditor of Madras Roasted Gram Mills owned by the respondent.
3. The Appellants preferred a petition under section 9 of the Provincial Insolvency act before the Principal Subordinate Judge, Pondicherry against the Respondent praying for an order to adjudge him as insolvent and to vest the properties describe in the schedule to the official receiver or in the alternative to appoint a receiver to take possession of the entire Property and sale of his estate for the purpose of payment of the amount due to the member of the Appellant Association.
4. In the petition in I.P.No.1/1993, Appellant as petitioners contended thus :-
(a) Petitioner is an Association of Creditor registered under the provisions of the societies Registration Act. The member of the Association invested considerable amount with the Respondent in the business concern floated by him in the name and style of Madras roasted gram mills at 57, Rangapillai Street, Pondicherry. The Respondent was doing business as its sole proprietor. Taking advantage of the trust and confidence reposed in him the Respondent has collected more than Rs.19 lakhs from as many as 74 persons. Since the Respondent failed to pay interest members of the Association of the Creditor approached him and demanded payment of the amount invested by them. However, the Respondent gave evasive replay promising to replay the amount after one year. In the meantime, the petitioner came to know that the Respondent was attempting to sell the building bearing D.No.57, Rangapillai street, Pondicherry with a view to defeat the claim made by the creditors.
(b) The Respondent is a native of Madurai District and the petitioner learnt that he has purchased several items of properties in the name of his wife, son and other relative so as to keep the properties beyond the reach of his creditors. Respondent also sold his factory for Rs.47 lakhs and he has not paid the money to the members of the Association and invested the same in real estate in the name of his family members. In such circumstances, application under section 9 of the Provincial Insolvency Act, 1920 was filled to declare the Respondent as an insolvent.
5. Respondent on appearance before the trail Court filed his counter denying the allegation leveled against him. In the counter filled by him, it was stated thus:-
(a) The Association is legally incomplete to maintain petition under Section 9 of the provincial insolvency Act.
(b) The Association which is a separate legal entity under law, has not deposited any amount with him so as to give a cause of action under Section 9 of the provincial insolvency Act.
(c) Respondent was not served with notice of the order fixing the date of hearing of the Insolvency petition is required under Section 19 of the Act. It was only on coming to know of the pendency of the insolvency petition, he took steps to enter appearance for the purpose of contesting the proceedings.
(d) The petitioner has not furnished correct particulars of Act of insolvency and the date of commission of such Act, as required under Section 13(2) of the Act and therefore, the petition which contains vague allegation and irrelevant particular was liable to be dismissed as not maintainable. The Court at Pondicherry has no territorial jurisdiction, as the Respondent was residing outside the jurisdiction of the said Court.
(e) Respondent has no intention to defraud the creditors at any point of time and he got property sufficient to discharge the entire debt. Therefore, there was no cause of action for filing as insolvency petition against him.
Disposal by the Insolvency Court
