Patna High Court
Haridayal Sah vs Motilal Sarawagi on 21 April, 1960
Equivalent citations: AIR1960PAT522, AIR 1960 PATNA 522
Author: N.L. Untwalia
Bench: N.L. Untwalia
JUDGMENT N.L. Untwalia, J.
1. This is an appeal by the debtor under Section 75 (2) of the Provincial Insolvency Act against the order of the learned District Judge passed under Section 25 (2) of the said Act dismissing his application for being adjudicated as an insolvent. The application was opposed by the creditor who is the sole respondent before me. Admittedly, the dues are to the extent of 1,800 and odd. The application was resisted chiefly on the ground that the debtor was possessed of such properties as would enable him to pay the debts. The learned District Judge, on a consideration of the evidence of the two sides, is not prima facie satisfied that there are grounds for believing that the debtor is unable to pay his debts. He has, therefore, dismissed his application.
2. The two grounds on which this application has been dismissed are that the debtor has purported to transfer his interest in the ancestral house in favour of his younger brother for a sum of Rs. 2000 after the institution of the suit of the creditor contesting the application. The learned District, Judge is not satisfied that this was a bona fide and genuine transfer. He, therefore, finds that the debtor "is guilty of fraudulent suppression of material facts and has not been honest." He also finds relying upon the evidence of A. W. 3, a witness examined on behalf, of the debtor, that he is guilty of not producing accounts of his income from engagements as a broker and commission agent and that he has deliberately suppressed this fact of dealing as a broker in ghee business.
3. Mr. Sushil Kurnar Jha appearing in support of this appeal submitted, on the strength, of two Bench decisions of this Court in Bhagirath Chaudhry v. Mt. Jamuni, AIR 1927 Pat 188 and Narayan Mistri v. Ram Das, AIR 1928 Pat 477, that the learned District Judge is not justified in going into the question of benami transfer made by the debtor in this proceeding, where he has to see prima facie as to whether the debtor is unable to pay his debts or not. It is no doubt true that these two decisions support his submission on the general principle of law. Ordinarily, the question of benami could not be and should not be gone into at this stage of the insolvency proceeding; nonetheless it does not debar a Court from looking into the conduct of the debtor and to see as to whether really he is in a position not to pay the debts as alleged by him. While coming to this satisfaction on prima facie evidence the Court can look into the attending circumstances and the conduct of the debtor.
In this particular case it appears from the evidence of the debtor himself that the house in question was the ancestral house belonging to the debtor and his younger brother and the house was acquired bv his father. He had no evidence to prove his separation from his brother although he asserted that he separated after the death of his father from his brother. In such a situation why and for what purpose a transfer was made to the younger brother is not at all clear from the evidence of the debtor.
If from the questions put in cross-examination the learned District Judge came to the conclusion that the conduct of the debtor was fraudulent, I, sitting in appeal over his judgment, find it difficult to upset it simply on the ground that the question of benami cannot be gone into at this stage of the insolvency proceeding. In my opinion, in the instant case, strictly speaking it is not a question of going into a benami nature of the transaction. From the-answers given by the debtor it seems that he purported to bring into existence a sale deed transferring his half share in the ancestral house in favour of his younger brother in order to defraud the creditor.
4. Even assuming the contention put forward on behalf of the appellant to be acceptable on the first question, I find the appellant has a worse case on the second question. The case of the contesting creditor was that the debtor was dealing in grains and ghee. The debtor himself admitted that he was so dealing, but he did not admit that he was dealing in these commodities on the date of his application or on the date of his deposition. According to his case, he was not carrying on any business either at Muzaffarpur where he claims to be residing on the date of deposition, or at Sitamarhi.
His witness No. 2 stated that the debtor supports himself by selling Adauri and Tilouri, while witness No. 3 states that he works at Muzaffarpur In ghee business as a broker and gets commission and maintains his own account of commission. The three statements of the three witnesses are contradictory. As against this, evidence on behalf of the creditor was that the debtor carries a business of ghee, flour and grains.
Even assuming that at this stage of the insolvency proceeding, a full trial cannot be held and it cannot be found as to whether the debtor was dealing in business or not, it appears to me from the three contradictory statements of the debtor and the two witnesses that the debtor has not come out with a truthful story in the insolvency matter to tell the Court as to what kind of business he was dealing in either on the date of the present application or on the date of his deposition. In such a situation if the learned District Judge has thought it fit to rely only on the evidence of A. W. 3 to hold that he was carrying on a business as a broker of ghee and has failed to produce his accounts of that business and to hold that prima facie he is not satisfied that the debtor is unable to pay his debts, I do not think that shall he justified in interfering with his order on such a state of evidence as I have indicated above.
5. As against the decisions cited on behalf of the appellant, Mr. L. M. Sharma placed reliance upon two other decisions of this Court in Ganesh Lal v. Sanehi Ram, AIR 1933 Pat 43 and Jagarnath Sahu v. Beni Prasad, AIR 1934 Pat 97 (1). Keeping in view the principles enunciated in these two decisions, I do not think that this is a fit case where I should allow this appeal and adjudicate the appellant as an insolvent.
6. In the result, the appeal fails and is dismissed but I would make no order as to costs.