Bombay High Court
Harshad Ratilal Shah vs Ishardas Sudarshanlal on 6 December, 1985
Equivalent citations: (1985)87BOMLR662
Author: M.H. Kania
Bench: M.H. Kania
JUDGMENT
M.H. Kania, Acting C.J.
1. This is an appeal against a judgment of Parekh, J. dated April 9, 1985 passing an order of adjudication on the aforesaid insolvency petition No. 12 of 1984. The appellant before us is the judgment-debtor against whom the order of adjudication was passed. The respondent firm is the petitioning creditor. Only a few facts require to be stated for the purpose of the disposal of this appeal because the only question argued before us is whether the learned trial Judge had jurisdiction to entertain the aforesaid petition.
2. The petitioning creditor filed a suit against the debtor in this Court being summary suit No. 1165 of 1980. An ex pane decree was passed in the said suit. The judgment-debtor appealed against; the said decree and, in the appeal, obtained an order for the payment of decretal amount by instalments. The judgment-debtor failed to pay any instalment and the entire decretal amount became due and payable, The petitioning creditor thereafter took out an insolvency notice dated November 23, 1981. Attempts to serve this notice personally were unsuccessful and it was finally served by substituted service. The act of insolvency took place on November 22, 1983 by reason of non-compliance with the notice for a period of 35 days. The appellant judgment-debtor inter alia contended that the appellant had not within a year prior to the filing of the petition either resided or carried on business within the ordinary original civil jurisdiction of this Court nor had he a dwelling house situated within the jurisdiction of this Court during that period. The rest of the contentions taken up by the appellant-judgment-debtor need not detain us.
3. Both the parties led evidence before the learned trial Judge. After deposing to the obtaining of the decree one Lalit Sudarshan Agarwal, a partner in the petitioning creditor firm, stated that the petitioning creditor had business dealings with the judgment-debtor whom he knew since 1978. The judgment-debtor was dealing in electrical goods and carrying on business in the name of Hira Electricals. This businsss was carried on at. Mangaldas Building, Kitchen Garden Lane, Lohar Chawl, Bombay. He also stated that the judgment-debtor was residing in a building called 'Happy Home' at Nap-can Sea Road in Bombay. Lalit then deposed to the issuance and the service of the insolvency notice and non-compliance by the respondent with the requirement thereof. In his cross-examination Lalit admitted that he was not able to deny a suggestion that the judgment-debtor had not been residing in Bombay, after December, 1981. He, however, denied the suggestion that the judgment-debtor had not been carrying on any business in Bombay since 1981. Although he asserted this, his cross-examination shows that his knowledge of the judgment-debtor carrying on business after December, 1981 was purely based on hearsay and hence of no evidentiary value. Judgment-debtor, Harshad Ratilal Shah, also gave evidence in this matter. He stated that prior to December, 1981 he was residing in a flat at "Happy Home", at Napean Sea Road. These premises were in the name of his wife. "After December, 1971 he was residing at Surat. He 'went on to assert that the premises at "Happy Home" in Bombay were sold by him to one Ramesh and that there was an agreement of sale in respect of these premises. He produced the alleged agreement of sale on the next day, namely April 8, 1985. His further examination shows that, according to him, this agreement was signed by his wife and one other person who had signed as "Saked" and whose signature he knew. Thereafter, in his examination-in-chief, he was shown the said document again and he had to admit that there was no signature of "Saked" appearing on this document, and that he could not: even identify the signature of "Saked". Later, in his examination-in-chief he went on to say that he was not even present at the time when this alleged agreement of sale was executed. The result is that there is no evidence whatever to show that the said flat was sold as claimed by the judgment-debtor. In his cross-examination he was forced to admit that as far as -his residential flat at Happy Home is concerned, it was purchased by the judgment-debtor from his money but was taken in the name of his wife as a benamidar, As far as carrying on business is concerned, the judgment-debtor admitted that he was carrying on business in the name of Hira Electricals at Mangaldas Building, which confirms the statement made by Lalit Sudarshan Agarwal. The judgment-debtor went on to assert that he was doing business in Bombay only up to the end of 1979 and thereafter he had done no business in Bombay. There is nothing, however, to show that the said shop in which the judgment-debtor carried on business at Mangaldas Building was disposed of. In fact, the record shows that the court receiver was appointed receiver of the business carried on in the said shop and has taken charge of the goods therein. It is significant that the judgment-debtor has, in the appeal preferred by him against the ex parte decree passed in favour of the petitioning creditor, given an undertaking not to surrender, transfer or dispose of his tenancy rights with good-will in respect of the said shop premises.
4. On the basis of this evidence the learned trial Judge came to the conclusion that during one year prior to the filing of the insolvency petition on February 21, 1984, the judgment-debtor maintained a dwelling house in Bombay within the jurisdiction of this Court and had also carried on business within the jurisdiction of this Court. It is the correctness of these conclusions which is sought to be challenged by Miss Seth on behalf of the appellant.
5. It is contended by Miss Seth, learned Counsel for the judgment-debtor that, in the present case, the evidence shows that the judgment-debtor neither resided in Bombay nor could it be said that he had maintained a dwelling house in Bombay within one year prior to the filing of the insolvency petition. She further urged that it could also not be held that during the said period of one year the judgment-debtor had carried on any business in Bombay, Mr. Shah, on the other hand, contended that the facts on record show that the judgment-debtor had resided in Bombay and maintained a dwelling house in Bombay during the said period of one year and that he had also carried on business in Bombay during that period and hence the Court had jurisdiction to entertain the petition.
6. Before examining the contentions urged by counsel, it might be useful to refer to Section 11 of the Presidency-Towns Insolvency Act, 1909. Section 11 deals with "Restrictions on jurisdiction". The relevant portion of Section 11 of that Act reads:
The Court shall not have jurisdiction to make an order of adjudication, unless:
(a) ... (b) the debtor, within a year before the date of the presentation of the insolvency petition, has ordinarily resided or had a dwelling-house or has carried on business either in person or through an agent within the limits of the ordinary original civil jurisdiction of the Court; or
(c) ...(d) ...
As we shall presently show, the evidence clearly establishes that the judgment-debtor had maintained a dwelling house in. Bombay during the period of one year prior to the presentation of the insolvency petition and had also carried on business in Bombay. In view of this it is not necessary for us to go into the question whether it could be said that he had also resided in Bombay during the said period of one year. As far as the question of dwelling house is concerned, the evidence to which we have; referred clearly shows that, admittedly, till December, 1979 the judgment-debtor was residing in a flat at Happy Home at Napean Sea Road in Bombay. That flat belonged to him and, in any event, it was used by him as a dwelling house. He has admitted that he had purchased it out of his funds so that there is no> question of his wife being the owner of the said flat. His claim that he had sold this flat to one Ramesh is totally unfounded and unworthy of credence/The agreement which was relied on by him was not even shown to have been signed by any one other than his wife. He was not even present when the alleged agreement was supposed to have been signed. It is significant that under Clause (b) of Section 11 of the Presidency-towns Insolvency Act the expression used in this connection, "ordinarily resided or had a dwelling house... It, therefore, cannot be said that only a person who ordinarily resides in particular premises can be said to have a dwelling house in the said premises. It may be that the judgment-debtor was ordinarily residing at Surat during the year prior to the presentation of the insolvency petition, but he has admitted that even after he commenced residing in Surat his family resided in the said flat in Bombay. There is nothing to show that the said flat, which was admittedly used by him as a dwelling house ceased to be his dwelling house in the sense that whenever he came to Bombay he could not use it as dwelling-house in his own right.
7. Coming next to the question as to whether it can be said that the judgment-debtor carried on business in Bombay during the aforesaid period of one year prior to the presentation of the petition, the position which emerges on the evidence is that there is no evidence to show that he actually did any business as such in Bombay during the period. However, the fact remains that, admittedly, till December, 1979 he was carrying on business in a shop at Mangaldas Building at Lohar Chawl in Bombay. That business had several debts and the petitioning creditor is a business creditor of the judgment-debtor. What we have to consider is whether, in a case where a person who is carrying on a trade in a shop or business establishment at a place he can be said to have closed his business at that place till all his trade liabilities are discharged. In this regard we find that there is a decision of a learned Single Judge of this Court reported in Re Girdharlal Shanker Dave (1970) 73 Bom. L.R. 397 where it has been held that, for the purpose of Section 11(b) of the Presidency-towns Insolvency Act, 1909, a business which was admittedly carried on by the debtor within the limits of the ordinary original civil jurisdiction of the Court, will be deemed to be continued to be carried on until all the trade or business liabilities have been discharged notwithstanding that there might be no assets available for the discharge of the said liabilities. In that decision the learned Judge relied upon the decision in In re Dagndl Ex parte Gaan and Morley (1896) 2 Q.B. 4097. In that case, the debtor, Mrs. Dagnall, a married woman, carried on, separately from her husband, the trade of a licensed victualler at the Railway Hotel, Crawley. On December 15, 1894, she sold the goodwill of the hotel and gave up possession of the premises to the purchaser. On January 2, 1895, she committed an act of insolvency and a question arose whether she was carrying on a trade at the time when her business had been disposed of but the trade liabilities in respect of the same had not been fully discharged. Vaughan Williams, J., who was an undisputed authority on the law of Bankruptcy, in the course of his judgment observed (at p. 410):
It seems to me that trading is not completed until you have performed all the obligations that the fact of trading imposed upon you.
It was held by Vaughan Williams, J. in that case that the "carrying on" of the trade continued so- long as the debts of the trade remained unpaid. It was pointed out by him that the decisions which had been given by the English Courts on the meaning of the phrase "being a trader", which was used in the Bankruptcy Act, 1869, were not binding in the interpretation of the phrase "carrying on a trade" used in Section 1(5) of the Married Women's Property Act, 1882. The decision in In re Dagnall was approved by the House of Lords in the leading case of Theophile v. The Solicitor-General [1950] A.C. 186. In that case it was held by the House of Lords that a debtor who had carried on business in England continued "carrying on business in England" within Section 1(2)(c) of the Bankruptcy Act, 1914, until all the debts were paid, The phraseology used in the relevant provision of the English Bankruptcy Act, 1914, namely Sub-section (2)(c) of Section 1 is in part materia with the phraseology used in this connection in Section 11(b) of the Presidency-Towns Insolvency Act, 1909 and we see no reason why the interpretation given by the English Courts to the expression "was carrying on business" should not be applied in construing the expression "has carried on business" used in Section 11(b) of the Presidency-Towns Insolvency Act, 1909. We find that a similar view has also been taken by a Division Bench of the Madras High Court in Goverdhandass v. Party & Co. (1925) I.L.R. 48 Mad. 795. In the light of these decisions it is clear that in the present case the judgment-debtor must be deemed to have continued carrying business in Bombay, within the ordinary original civil jurisdiction of this Court during the said period of one year prior to the presentation of the petition as, admittedly, he had not discharged the trade liabilities of his business there.
8. In view of what we have observed above, we are clearly of the view that the learned Judge was, with respect, right in coming to the conclusion that the Court had jurisdiction to entertain the insolvency petition and pass an order of adjudication thereon.
9. No other controversy is raised before us and hence it is not necessary for us to go into any other questions.
10. Appeal dismissed with casts.
11. Miss Seth applies that the order of adjudication should be stayed for some time to enable the judgment-debtor to consider whether to prefer an appeal to the Supreme Court. In our view, there is no merit in this application. In the first place, the order of adjudication has already been published so that no question of further damage to the reputation of the judgment-debtor can arise. Once there is an order of adjudication against a debtor it is against public interest that there should be any stay of the investigation by the Official Assignee which is intended for the purpose of realising the assets of the insolvent available for payment of his debts. Application is rejected.
12. In view of the Appeal having been dismissed, the notice of motion No. 1233 of 1985 does not survive and the same is dismissed. No order as to costs of the notice of motion.