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IN THE HIGH COURT OF JUDICATURE AT MADRAS
P. VELMURUGAN, J.
Marappan & Others - Appellants
Versus
M. Selvaraj & Others – Respondents
C.M.S.A. No. 18 of 2016 & C.M.P. No. 8742 of 2016
Decided On : 14-03-2024
Insolvency Act - Adjudication of Insolvency - Sections 6 to 9 - 27(1) - 30 - 75 - 100 of CPC - [SUMMARY]
Fact of the Case:
The appellants filed an Insolvency Petition under Sections 6 to 9 of the Provincial Insolvency Act, alleging that the first respondent had borrowed amounts and sold properties to defeat their claims. The trial Court adjudged the first respondent as 'insolvent', but the first appellate Court reversed the judgment, leading to the present appeal.
Finding of the Court:
The first appellate Court failed to follow the procedures of the CPC and the Provincial Insolvency Act, and did not consider the evidence properly. The Court set aside the trial Court's order without recording any evidence or proving abscondance. The appeal was allowed without remitting the matter back to the trial Court for fresh consideration.
Issues: The main issues were the adjudication of insolvency, the procedure followed by the appellate Court, and the maintainability of the appeal.
Ratio Decidendi: The first appellate Court should have followed the procedures for additional evidence or remitted the matter back to the trial Court for fresh consideration. The appeal was maintainable under Section 75(2) of the Provincial Insolvency Act.
Final Decision: The impugned judgment of the first appellate Court was set aside, and the matter was remitted back to the trial Court for de-novo trial and disposal of the Insolvency Petition within four months. The appeal was allowed with no order as to costs.
JUDGMENT :
(Prayer: Civil Miscellaneous Second Appeal filed under Section 75 of the Insolvency Act read with Section 190 of the Code of Civil Procedure, against the judgment and decree dated 21.12.2015 made in C.M.A.No.53 of 2011 on the file of the Second Additional District Court, Erode, in reversing the order and final order dated 28.02.2006 made in I.P.No.63 of 1999 on the file of the Second Additional Subordinate Court, Erode.)
1. This appeal is filed under Section 75 of the Provincial Insolvency Act read with Section 100 of the Code of Civil Procedure (for short, 'CPC'), against the judgment and decree dated 21.12.2015 made in C.M.A.No.53 of 2011 on the file of the Second Additional District Court, Erode, reversing the fair and final order dated 28.02.2006 made in I.P.No.63 of 1999 on the file of the Second Additional Subordinate Court, Erode.
2. Before the trial Court, the appellants herein filed I.P.No.63 of 1999 under Sections 6 to 9 of the Provincial Insolvency Act, stating as follows:
(b) The second respondent in the I.P., borrowed amounts from the appellant/petitioner for his urgent necessity. Similarly, the first respondent herein borrowed Rs.1,35,000/- from the first petitioner for his urgent necessity and executed a Promissory Note on 16.01.1998, promising to re pay the said sum with interest @ Rs.1.50 per hundred per month, on demand.
(c) The second respondent in the I.P., had not paid any sum towards principal or interest, inspite of repeated demands made in person by the petitioners. The first respondent borrowed a sum of Rs,1,40,000/- from the second petitioner for his urgent necessity and executed Promissory Note on 16.01.1998, promising to re-pay the same with interest @ 18% per annum, payable on demand either to the second petitioner or his order.
(d) Again, the first respondent has borrowed a sum of Rs.25,000/- from the third petitioner and executed a Promissory Note on 20.01.1998 in favour of the third petitioner, promising to re-pay the above sum with interest @ 18% p.a. payable on demand either to the third petitioner.
(e) Again, the first respondent borrowed Rs.25,000/- from the fourth petitioner and executed a Promissory Note on 13.06.1997 in favour of the fourth petitioner, promising to re-pay the same with interest at the rate of 18% p.a. payable or demand either to the fourth petitioner.
(f) The first respondent has not paid any sum either towards principal or interest to the petitioners so far, inspite of repeated demands made in person by the petitioners herein.
(g) While that being so, the first respondent, with a view to defeat, defraud and delay the lawful claim due on the above Promissory Notes, sold Item No.I of the schedule mentioned properties to the respondent Nos.2 to 5 and sold Item No.2 of the schedule mentioned properties to the sixth respondent under two sale deeds, dated 15.03.1999, registered as Document Nos.547 of 1999 and 561 of 1999 on 16.03.1999 in the Office of Sub-Registrar, Perundurai. No provision had been made in the sale deeds for discharging the debts due under the Promissory Notes for the petitioners herein. The respondents were fully aware of the debts due to the petitioners.
(h) The two sale deeds dated 15.03.1999 executed by the first respondent in favour of the respondents 2 to 6 are not binding and they are created with a view to defeat and defraud the petitioners/creditors. Therefore, the first respondent has committed any act of insolvency.
(i) The first respondent departed from his residence or in his usual place of business. This act of absconding also amounts to act of insolvency.'
(j) The sale deeds dated 15.03.1999 are invalid and it does not bind the petitioners. The petitioners obtained registration copy of sale deeds only on 09.06.1999. The appellants/petitioners are not able to issue notice to the respondents. The pe
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