The insolvency court has the obligation to decide on the existence of a creditor and debtor relationship and cannot dismiss a petition based on the complexity of the questions raised.

Burn, J.

1. This appeal is from the order passed by the learned District Judge of Cuddapah dismissing I.P. No. 90 of 1936. This petition was filed by a oreditor named Alladu Nagiah against one Golla Narasimha Eeddi. The present appellant Mundla Gangi Eeddi was substituted as the petitioning oreditor in 1937. The learned District Judge has dismissed the petition on the ground that the case involves the decision of complicated questions of law and fact before it can be held that a subsisting relationship of creditor and debtor has been satisfactorily established. The debtor objected to adjudication at the instance of the present appellant, alleging that this creditor had agreed to a composition scheme which had been accepted by other creditors also. The appellant, as appears from the order of the learned Judge, did not file any counter affidavit to this statement and the agreement set up by the debtor was sent for examination to the Government Examiner of Questioned Documents. After that official expressed the opinion that the signature on the alleged agreement was the signature of the appellant, the appellant put in a statement in which he alleged that the signatures of the creditors in the alleged agreement had been obtained by fraud, and that he, even if his signature also were found to be genuine, would not be bound by it. It is the raising of these pleas that has caused the learned Judge to say that complicated questions of law and fact have to be gone into before it can be decided that the petitioner and the respondent stand to each other in the relation of creditor and debtor. The learned Judge has said that these questions ought to be decided in a regular suit and he has referred the petitioner to a regular suit and dismissed his petition.

2. Mr. Seshagiri Rao for the appellant has contended that in so doing the learned District Judge has acted wrongly. Mr. Seshagiri Rao argues that the sole question of importance to be decided by the insolvency Court in this case was whether the relation of creditor and debtor still existed between the petitioner and the respondent or not. He says that the insolvency Court has no right to say that it will not decide this question merely because difficult questions of law and fact arise. The learned District Judge has relied upon a decision of a single Judge of the Bombay High Court, AIR1935Bom80 Gopikabai Mahadev v. Chapsi Purshottam. That was a case somewhat similar to this. The petitioning creditor was confronted with a receipt signed by herself. She was obliged to admit that she had passed a receipt to the debtor, but she alleged that it had been obtained from her by means of fraud and misrepresentation. The insolvency Court which was hearing the petition thought that these allegations on the part of the petitioning creditor ought to be inquired into, but the District Court on appeal held that it was not necessary for the insolvency Court to inquire into these questions and said that the receipt passed by the petitioner could not be impeached in insolvency proceedings. It was on second appeal that the matter came before the Bombay High Court. The learned Judge held that a second appeal did not, properly speaking, lie, but he observed that it was competent for the insolvency Court to refer the petitioning creditor to a regular suit on the facts of that case. At p. 169 the learned Judge is reported to have said:

Therefore, prima facie, not only is she not a creditor for an amount of Es. 800 but she is no creditor at all of the opponents on the date of the petition and if she replies in answer to the opponents petition that the receipt was fraudulently obtained, it is for her to establish that allegation and if the insolvency Court thinks that the question is of such a nature as can be properly adjudicated upon by a civil Court in a regular suit, I do not think that the discretion of the insolvency Court to refer parties to a regular suit is taken away by any of the provisions cite