Bombay High Court
The Laxmi Bank Ltd. vs Ramchandra Narayan Apte on 21 December, 1921
Equivalent citations: (1922)24BOMLR292, 67IND. CAS.238, AIR 1922 BOMBAY 80
JUDGMENT Norman Macleod, C.J.
1. The petitioner filed a petition under the Provincial Insolvency Act (III of 1907) shortly before Act V of 1920 was passed. The petition, therefore, would have to be proceeded with under the provisions of Act III of 1907.
2. Under Section 14(1) of the Act, on the day fixed for the hearing of the petition, or on any subsequent day to which the hearing may be adjourned, the Court shall require proof that the creditor or the debtor, as the case may be, is entitled to present the petition. Under Section 6(3) the debtor shall not be entitled to present an insolvency petition unless (a) his debts amount to five hundred rupees; or (b) he has been arrested or imprisoned in execution of the decree of any Court for the payment of money. Under Section 11(1) every insolvency petition presented by a debtor shall contain a statement that the debtor is unable to pay his debts.
3. When the petition came on for hearing the following issues were raised: (1) whether the petitioner has made a true and full disclosure of his property, (2) whether his debts amount to Rs. 500, and (3) whether he is unable to pay them. Under Section 15(1) where the Court is not satisfied with the proof of the right to present the petition, or of the service of notice on the debtor, or of the alleged act of insolvency, or is satisfied by the debtor that he is able to pay his debts or that for any other sufficient cause no order ought to be made, the Court shall dismiss the petition. The issue whether the petitioner has made a true and full disclosure of his property would not be pertinent at the inquiry under Section 15, provided the petitioner has given the particulars required with regard to his property, as it is not until after the adjudication that it can be ascertained whether the petitioner has made a true and full disclosure. The trial Judge seems to have dismissed the petition on the very ground on which he ought to have entertained it, namely, the unsatisfactory conduct of the debtor with regard to his property, for it would only be by the administration of the estate in insolvency that the claims of the creditors could be properly protected. He also thought that the debtor had not satisfied the Court that he was unable to pay his debts, but we think that this finding was based on wrong grounds.
4. In appeal the Joint Judge dealt merely with the question whether the debtor was unable to pay his debts, and though it was rightly held that the insolvency should proceed under the provisions of Act III of 1907 he appears to have thought that the new Act had made a change with regard to what was required to be proved before it could be decided that the petitioner bad a right to present his petition. As a matter of fact there is no material difference in this respect between the Act of 1907 and the Act of 1920. Under Section 11(1) of Act III of 1907 the debtor has to state in his petition that he in unable to pay his debts, and if either on the face of the proceedings or on a representation by the opposing creditor the Court is satisfied that this statement is not correct, it can dismiss the petition. But if the debtor has made a disposal of his property with a view to defraud his creditors who might otherwise have been paid, then the Court is not justified in holding that he is able to pay his debts, but should admit the petition, so that the interests of the creditors may be benefitted by the special powers given to the Court while administering an insolvent's estate. The order of remand was rightly made though the reasons given for making it were not correct. Therefore, we dismiss the appeal. When the trial Court takes up the petition again according to the order of remand made by the lower appellate Court, the learned Judge will, no doubt, deal with the petition in the light of our remarks.