Insolvency petitions should not be dismissed for non-prosecution if rights are accrued to the creditors, and properties of a person seeking insolvency should not be auctioned or distributed without the court declaring the person as insolvent.

ORDER :

1. This revision petition is arising out of the orders in I.A. No. 361 of 2010 dated 19th October 2010 in I.P. No. 8 of 2003 on the file of Senior Civil Judge, Jagtiyal.

2. The revision petitioner has filed insolvency petition before the Senior Civil Judge’s Court, Jagtiyal. His case before the trial Court was that he used to run a retail wine shop under the name and style of ‘Himalaya Wines’ at Mallapoor, which was taken on lease from one Nagula Gangadhar by borrowing amounts from the respondents to a tune of Rs. 4,85,000/-. There were 17 respondents arrayed in the insolvency petition. It is the further case of the revision petitioner that he gave Rs. 50,000/- to the original owner as goodwill and paid Rs. 3,00,000/- rentals to the Government. It is the specific contention of the revision petitioner that the villagers of Mallapoor Ikya Sangham demanded Rs. 1,00,000/- from him for development of the village and as he refused to pay the said amount, they passed a resolution not to purchase liquor from his shop and for a period of one month, there was no business for him.

3. Later, the petitioner agreed to give Rs. 50,000/- to the Ikya Sangham and that the customers of the shop have not paid him the amounts for the liquor purchased by them and were due to him in a sum of Rs. 1,00,000/-. It is his case that due to the downfall of the business and also due to the pressure and threatenings by the respondents to repay the debts, he was constrained to file the insolvency petition showing the B-Schedule property as the sole property available to repay the debts to all the 17 respondents. In the A-Schedule, the petitioner has given the particulars of amounts payable by him to each of the respondents, totalling to Rs. 4,85,000/-.

4. It is the contention of the revision petitioner that the I.P. was dismissed for non-prosecution against R-3 to R-7. An Interlocutory application was filed by the revision petitioner praying the Court to appoint a Receiver to take possession of the B-Schedule property and the trial Court accordingly appointed the Advocate-Receiver pending disposal of the Insolvency Petition. The respondents filed a petition i.e. I.A. No. 318 of 2005 praying to direct the Receiver to sell the B-Schedule property and deposit the sale proceeds in to the Court, for which, the petitioner filed counter opposing the petition on 25.08.2005.

5. Heard learned counsel for petitioner and the counsel for the respondents and also perused the record.

6. It is urged by the learned counsel for petitioner that the order of the trial Court is arbitrary, since the same was passed after dismissal of the insolvency petition itself for default on 14.07.2006. It is further urged that the petition filed by the petitioner herein in I.A. No. 361 of 2010 to restore the insolvency petition by setting aside the order dated 14.07.2006, was dismissed by the trial Court with an observation that “the petitioner failed to explain how the petition is within limitation and which special statute, if any, empowers him to seek the relief of setting aside the sale dated 14.07.2006.”

7. On the other hand, it is urged by the learned counsel for respondents that the trial Court has rightly dismissed the I.A. as the petition was not filed within the period of limitation. It is further contended that the specific provision of statute was also not mentioned in the petition. Therefore, he prayed to dismiss the present revision petition as it is devoid of merits.

8. The record reveals that I.P. No. 8 of 2003 was dismissed for default on 14.07.2006 and on the same day, the Court directed the receiver to sell the B-Schedule property in public auction and distribute the amount among the creditors. Accordingly, the Advocate-Receiver had auctioned the property of the petitioner i.e. the house, which was knocked down by the respondents herein for Rs. 50,000/-. The Receiver, after receiving the auction amount, filed a report before the Court and another I.A. No. 229 of 2003 (for a