Madras High Court
P.K. Venkateswaran vs V.R. Shanmugam on 3 October, 1986
Equivalent citations: AIR1987MAD143, (1987)IMLJ22, AIR 1987 MADRAS 143, (1987) 1 MADLJ22
ORDER
1. This a petition by three creditors to adjudge the respondent as insolvent under Ss. 9(d)(ii) and (iii), 10, 11, 12 and 13 of the Presidency Towns Insolvency Act, hereinafter referred to as the Act.
2. According to the petitioners, the respondent borrowed from the 1st petitioner a sum of Rs. 15,000/- on 11-9-1980 bearing interest at 24% per annum; a sum of Rs. 15,000/- on 6-2-1982 bearing interest at 30% per annum, a sum of Rs. 5,000/- on 9-11-1983, bearing interest at 30% per annum and another sum of Rs. 7,000/- on 30-10-1983, bearing interest at 30% per annum; in all, the respondent has borrowed a sum of Rs. 42,000/- from the l st petitioner. He has borrowed from the 2nd petitioner a sum of Rs. 1,500/- on 22-12-1982 with interest at 36% per annum; a sum of Rs. 65,000/- on 1-10-1983 with interest at 36% per annum; a sum of Rs. 5,000/- on 19-10-1983, with interest at 42% per annum; a sum of Rs. 21,000/- on 9-1-1984, with interest at 12% per annum; a sum of Rs. 70,000/- on 25-5-1984, with interest at 36% per annum; and a sum of Rs. 20,000/- on 22-8-1984, with interest at 36% per annum; in all, he has borrowed from the 2nd petitioner a sum of Rs. 1,82,500/-. The respondent has borrowed from the 3rd petitioner a sum of Rs. 4,000/- on 6-6-1983, with interest at 36% per annum and another sum of Rs. 4,000/- on 10-1-1984 with interest at 12% per annum.
3. For some of the amounts borrowed from petitioners 1 and 2, the respondent has furnished collateral security of Door No. 5, Ayya Pillai Street and 70, C.N. K. Street, both situated in Triplicane, Madras-5. The rest of the amounts due to petitioners 1 and 2, and the entire amount due to the 3rd petitioner are not covered by security. All the loans have been advanced by the petitioners to the respondent through one A. V. Subbiah, Advocate. The respondent paid interest up to 30-9-1983 on two promissory notes executed by him, each for Rs. 15,000/- dated 11-9-1980 and 6-2-1982 respectively, on 5-10-1983, by duly making endorsement on the promissory notes. Thereafter, he suspended payment of interest. The respondent has not paid interest in respect of petitioners 2 and 3 and also in respect of the 1 st petitioner on the rest of the promissory notes. Thus, on the date of the filing of the petition, a sum of Rupees Two Lakhs and odd is due to the petitioner's towards principal as detailed in the Annexure filed along with the petition.
4. It is further alleged in the petition that the respondent has committed an act of insolvency within the meaning of S. 9(d)(ii) and (iii) of the Act. As the petitioners have not pressed the adjudication of the respondent with regard to the act of insolvency alleged to have been committed by the respondent under Ss. 9(d) and 9(g) of the Act but pressed only an act of insolvency under S. 9(d)(ii) and (iii) of the Act, it is sufficient to confine to the averments in the petition which constitute an act of insolvency under S. 9(d)(ii) and (iii) of the Act.
5. The petitioners further contended in the petition that the respondent was not available in his house for six months prior to the filing of the petition. The petitioners called on the respondent several times to demand payments and on all such occasions, his wife has been saying that the respondent is out of station. Ultimately, the petitioners caused a lawyer notice to be issued to the respondent to inform him that insolvency proceedings have been taken against him. The same has been returned with the postal endorsement that the respondent is not found for delivery on various dates. A copy of the lawyer notice was sent by the 1st petitioner subsequently, which was also returned with a similar endorsement. Lastly, the 2nd petitioner went to the house of the respondent on 5-12-1985 to demand payment in respect of the earliest promissory note dated 22-12-1982 for Rs.1,500/- as it expired on 21-12-1985. The respondent's wife informed the 2nd petitioner that the respondent has gone out of station but the 2nd petitioner was able to hear the voice of the respondent from inside the house. All attempts and persuasion of the 2nd petitioner to meet the respondent proved futile. Therefore, it is obvious that the respondent has either departed from his dwelling house or has absented himself so as to deprive his creditors of the means of communication and thereby he has committed an act of insolvency under S. 9(d)(ii) and (iii) of the Act. Since petitioners 1 and 2 have security only for certain loans and as the other items of loans remain unsecured and as the respondent has committed several acts of insolvency, the 1st petitioner is willing to relinquish his security in respect of the house of the respondent viz. Door No. 5, Ayya Pillai Street, Triplicane, Madras-5 for the benefit of the creditors in the event of the respondent being adjudged insolvent. The 2nd petitioner is also willing to relinquish his security in respect of Door No. 70, C.N.K. Street, Triplicane, Madras-5. The debt payable by the debtor/respondent is more than Rs.500/- in a liquidated sum payable immediately and the act of insolvency has occurred within three months prior to the filing of the petition. The petitioners therefore pray for adjudging the respondent as insolvent.
6. The respondent in his counter-admits the borrowings of Rs. 1,500/- on 22-12-1982, Rs. 65,000/- on 1-10-1983, and Rs. 5,000/- on 19-10-1983 from the 2nd petitioner. The further borrowings alleged in the petition from the 2nd petitioner are denied. It is then stated that the first two promissory notes in favour of the 1st petitioner have been discharged by the 2nd petitioner from the loan of Rs. 65,000/- advanced by him to the respondent on 1-10-1983, and actually he received only Rs. 14,330/-. Out of the borrowings mentioned from the 3rd petitioner, the respondent admits only a sum of Rs. 4,000/- on 6-6-1983. The respondent further stated that he has paid all the amounts due to all the three petitioners including interest and a sum of Rs. 1,50,000/- was paid to the 2nd petitioner in June 1984. The respondent is working as travel agent in M/s. Pawar Airways and in that connection he used to go to Bombay and Bangalore carrying parcels. It is not correct to say that the respondent was not available in the dwelling house. The petition's summon was served on the respondent only at his house at No. 70, C.N.K. Street, Triplicane, Madras-5 and that house is his own house, where he is still living. The allegation that he had departed from his dwelling house is not true. He has not committed any act of insolvency under S. 9(d)(ii) and (iii) of the Act.
7. Further according to the respondent's counter, the 2nd petitioner wanted to buy the respondent's property bearing Door No. 31; Venkatesa Naicken Street, and entered into an agreement on 24-10-1983 and paid Rs. 50,000/-. Since he could not complete the sale, that property was sold to one P. Mohamed Habeeba, wife of P. Sulaiman on 28-6-1984. The said Sulaiman paid a sum of Rs. 1,50,000/- to the 2nd petitioner directly and got the agreement dated 24-10-1983 duly cancelled. This sum was paid in discharge of all the outstanding as on that date to all the three petitioners and also returned the advance to the 2nd petitioner. Therefore, there is no amount due to the petitioners. The respondent has not obtained any amount from any creditor after 31-12-1983. As the 2nd petitioner was aggrieved by the fact that the respondent has failed to sell his house property to him, has filed this petition as a vendetta making use of the promissory notes signed by the respondent which have not been returned after a sum of Rs. 1,50,000/ has been paid to him. The respondent has not committed any act of insolvency and there is no liability for the respondent to pay any amount to any of the petitioners.
8. The petitioners filed a reply repudiating the allegations made in the counter and stating that the respondent is selling his properties one after the other. Even after the filing of the petition, the respondent has sold one property and entered into an agreement to sell another property. The petitioners deny the allegation that the summons in this petition was served at the residence of the respondent. The same was served only at Door No. 62/14, First Floor, Manicka Mudaliar Mansion, Thayar Sahib Street, Madras-2 where the respondent's office is situate.
9. As already stated, though this petition is filed alleging that the respondent has committed different acts of insolvency falling under various sections of the Act, the petitioners have restricted their claim by making an endorsement on the petition to adjudge the respondent as insolvent only under Section 9(d)(ii) and (iii) of the Act. Therefore, I have not referred to the averments with regard to the other acts of insolvency and the counter with regard to those acts.
10. The first point to be decided is, whether the respondent has to be adjudged as insolvent. Under section 12 of the Act, in a petition to adjudge a debtor as insolvent, the creditor has to prove that the debt owing by the debtor to the creditor exceeds Rs. 500/-, that the debt is a liquidated sum, that the debtor has committed an act of insolvency on which the petition is grounded and that the game has occurred within three months before the presentation of the petition. If the petitioning creditor is a secured creditor, he should relinquish his security for the benefit of the general creditors in the event of the debtor being adjudged as insolvent. Under Section 13(4) of the Act, notwithstanding the proof of the above mentioned facts by the creditor, still the petition shall be dismissed if the debtor satisfies the Court that he is able to pay his debts or that he has not committed an act of insolvency or that for other sufficient cause no order ought to be made.
11. According to the petition, all the amounts advanced under various promissory notes by the petitioners herein to the respondent are subsisting except payment of some interest with regard to the first two promissory notes to the 1 st petitioner. The petitioners have filed all the promissory notes. Exs. P-1 to P-4 are the four promissory notes executed in favour of the l st petitioner. Exs. P 17, to P-19, P-21 and P-22 are the promissory notes executed in favour of the 2nd petitioner. Ex. P-20 is the promissory note executed in favour of the wife of the 2nd petitioner, who is not a petitioning creditor in this petition. Exs. P-25 and P-26 are the promissory notes executed in favour of the 3rd petitioner. In order to succeed in this petition, the creditors have to prove (i) that the debt outstanding is more than Rs. 500/- and (ii) the respondent has committed an act of insolvency. To prove the debt, the creditors filed all the promissory note executed in their favour by the respondent.
12. With regard to the borrowing of Rs. 15,000/- each under Exs. P- 1 and P-2 from the 1 st petitioner, the respondent's contention is, that the said two loans have been cleared by the 2nd petitioner when the respondent executed a promissory note in favour of the 2nd petitioner on 1-10-1983 under Ex. P-18 for Rs. 65,000/- and out of the said sum, the 2nd petitioner has cleared the loans due to the lst petitioner under Exs. P-1 and P-2 and after adjusting the advance interest and other dues, the respondent was paid only Rs. 14,330/-. Admittedly, the respondent did not receive back the promissory notes, Exs. P 1 and P-2. His explanation is, it is usual for the 2nd petitioner, who alone was arranging the loans as he happened to be the Sammandhi of A. V. Subbiah, Advocate to the respondent to retain the discharged pronotes. Besides the fact that the respondent has not got back the promissory notes, it is significant to note that the promissory note for Rs. 65,000/- was executed in favour of the 2nd petitioner on 1-10-1983 and the respondent has made endorsements on Exs. P-1and P-2 for payment of interest up to 30-9-1983 on 5-10-1983. If the two loans had been discharged by the execution of Ex. P-18 promissory note in favour of the 2nd petitioner, there is absolutely no reason for the respondent to make anendorsement on 5-10-1983 on Exs. P-1 and P-2. On the other hand, he ought to have got back the promissory notes Exs. P- 1 and P-2 or he ought to have made an endorsement that the promissory notes Exs. P-1 and P-2 stood cancelled by execution of Ex. P-18. There was also an earlier endorsement in Ex. P-1 on 31-3-1983 by A. V. Subbiah, Advocate on behalf of the respondent. Though it is stated that this endorsement has been made subsequent to the endorsement on 5-10-1983 this does not appear to be believable. If there was an endorsement only on 5-10-1983 by the respondent for the first time, he would not have left much space before his endorsement to enable somebody else to make another endorsement on the top of his endorsement. Therefore, in the light of his endorsement in Ex. P-2, where no space is left above the endorsement, the contention of the respondent that the endorsement by A. V. Subbiah was made subsequent to his endorsement on 5-10-1983 in Ex. P-1 cannot be believed, When the 1 st petitioner has proauced all the promissory notes, it has to be taken that the amounts due under those promissory notes are payable to the l st petitioner.
13. The respondent admits the execution of promissory notes in favour of the 1 st petitioner, three promissory notes in favour of the 2nd petitioner and one promissory note in favour of the 3rd petitioner but his contention is that all the amounts due to the petitioners have been discharged when he sold his house, 31, Venkatesa Naicken Street, Chepauk, Madras on 28-6-1984 to one F. Mohamed Habeeba, wife of P. Sulaiman. It is his case that the 2nd petitioner had agreed to purchase that house and paid an advance of Rs. 50,000/- but subsequently, he could not purchase the property as he had no money. So, the respondent sold the property to one F. Mohamed Habeeba, wife of Sulaiman under the original of Ex. P-15 for a consideration of Rs. 1,73,500/- and on that day itself the said P. Sulaiman directly paid Rs. 1,50,000/- to the 2nd petitioner in discharge of all the loans due to petitioners 1 and 2 and 3 and also towards the return of advance to the 2nd petitioner, and obtained the title deeds with respect to the said property, which were earlier given to the 2nd petitioner by the respondent, when he entered into an agreement to sell the property and received an advances of Rs. 50,000/-. To prove the payment of Rs. 1,50,000/- to the 2nd petitioner, the respondent, besides examining himself as R. W. 2, examined the said P. Sulaiman as R. W. 1. It is the case of the 2nd petitioner that he entered into an agreement with the respondent to purchase the said house but subsequently at the intervention of A. V. Subbiah, since the respondent wanted to sell the house property for a higher price to a third party to settle his dues, the 2nd petitioner cancelled the agreement and handed over the documents of title to the respondent after the respondent had returned the advance. P. W. 2 in his evidence deposed that the respondent told him that to clear the debts, he wanted to sell the property to a third party. According to P. W. 2, he did not receive any amount either from the respondent or from the said P. Sulaiman. Therefore, it has to be seen whether the entire amount due to the petitioners have been discharged as contended by the respondent or no amount has been paid as contended by the petitioners.
14. In the sale deed Ex. P-15, it is mentioned that the vendor is selling the property for the purpose of discharging the mortgage amount payable to Jayaram, Chetty (2nd petitioner) and also to discharge his other sundry debts. But, there is no documentary evidence for actually paying Rs. 1,50,000/- to the 2nd petitioner. None of the promissory notes executed in favour of the three petitioners, towards the discharge of which and also towards the discharge of advance to the 2nd petitioner, the said sum of Rs. 1,50,000/- is said to have been paid to the 2nd petitioner, has been got back at the time of payment. R. W. 1, who is said to have directly paid that amount to the 2nd petitioner, did not choose to obtain any receipt for the payment of such a huge sum of Rs. 1, 50,000/- to the 2nd petitioner. It is significant to note that R. W. 1 says that he paid the amount at the residence of the 2nd petitioner in the presence of his Advocate Abdul Rahim, Manickam and the respondent. If the amount was paid in the presence of his advocate, certainly the advocate would have insisted on a receipt being obtained from the 2nd petitioner to whom the amount was paid. The explanation of the respondent, who was examined as R. W. 2 is, that it is the usual practice of the 2nd petitioner not to return the promissory notes even though they are discharged, and further, as there was some dispute regarding interest payable, the discharged promissory notes were not obtained back, pending settlement of the interest. This explanation for not getting back the discharged promissory notes, is certainly not believable. In any event, if there is any dispute with regard to the payment of interest, there is no bar for obtaining a receipt for the actual amount paid. If the amount has been really paid in the presence of the advocate for R. W. 1, who purchased the property, certainly that advocate would have instructed R. W. 1 to pay the amount after obtaining a receipt. Therefore, the payment of Rs. 1,50,000/- to the 2nd petitioner is not believable.
15. There is one other circumstance to disprove lump sum payment of Rs. 1,50,000/- by R. W. 1 on 28-6-1984, the date of execution of the sale deed, to the 2nd petitioner. According to the recitals in the sale deed Ex. P. 15, the purchase amount has been paid in four instalments to the vendor, viz., Rs. 50,000/- on 2-1-1984, Rs. 62,000/- on 16-4-1984, Rs. 36,500/- on 4-5-1984 and Rs. 25,000/- on the date of registration viz, 28-6-1984. In such circumstances, it is unbelievable that the purchaser Sulaiman collected the amounts paid by him to the respondent earlier paid Rs. 1,50,000/- to the 2nd petitioner on the date of execution of the sale deed Ex. P- 15, to get back the title deeds relating to the purchase property. Therefore, the story set up by the respondent that the entire amount due to the petitioners has been discharged by the respondent by selling one of his house properties under Ex. P-15 is not believable. The petitioners have produced several promissory notes executed by the respondent which have not been discharged by the respondent. Therefore, the respondent owes these sums to the petitioners. The principal amount due under the promissory notes itself is more than rupees Two lakhs. The petitioners have only to prove that the respondent owes them more than Rs. 500/-, which is required under the Act.
16. Next, we have to see whether the respondent has committed an act of insolvency under Section 9(d)(ii) and (iii) of the Act. Under Section 9(d)(ii) of the Act, if a debtor departs from his dwelling house or usual place of business or otherwise absents himself, he commits an act of insolvency. Likewise under Section (9)(d)(iii), if a debtor secludes himself so as to deprive his creditors of the means of communicating with him, he commits an act of insolvency. According to petitioners 1 and 2, who have been examined as P. Ws. 1 and 2, the respondent was not available in his dwelling house. According to P. W. 1. from March, 1985 onwards he went to the house of the respondent several times to demand the amounts due but he was not available. According to P. W. 2, finally some time in December 1985, he went to the house of the respondent and he was told that the respondent was out of station but he heard the voice of the respondent from inside the house. Thereafter, he also sent a lawyer notice to the respondent and the same was returned unserved. Ex. P- 10 is the returned cover. The 2nd petitioner also sent another registered letter enclosing a copy of the Lawyer notice, which was also returned unserved. That returned cover is marked as Ex. P-11. In Ex. P-10, there is postal endorsement that the respondent was riot found during his delivery time on 22, 24, 2-5, 26, 28, 29 and 30-10-1985. Similarly, in Ex. P-11, there is a postal endorsement that the respondent was not found in his delivery time on 19, 21,22, 23, 25 and 26-11-1985.
17. The suit summon has been served on the respondent only in his business place at Thayer Sahib Street, Madras-2, which is clear from the evidence of P. W. 5, the Court Amin. According to P. W. 5, he went to the house of the respondent to serve the summons but he was not available. When he went again to the respondent's house to serve the suit notice, he was not available in the house and the inmates told him that the respondent had gone out and that they did not know where he had gone. According to P. W. 5, the 1st petitioner who accompanied him, told him that the respondent was available in his office and accordingly he went to his office premises at Thayar Sahib Street and served the notice -on him. P. W. 1 has admitted in his evidence that the respondent is carrying on business at Thayar Sahib Street and that he has started his business 1983. Though the notice sent to the respondent to his house address has been returned unserved, the petitioners have not chosen to send notice to the respondent to his business premises. Moreover, it is not the case of the petitioners that the house of the respondent has been locked. Admittedly, his wife has been in the house. No attempt has been made by the petitioners, before filing the petition, to contact the respondent in his business premises. In this connection, the suggestion on behalf of the petitioners is, the respondent was having telephone in his house till the year 1984 and had removed the same in the year 1985 with a view to shut the communication of the creditors. For that purpose, the petitioners filed the telephone directory for the years 1984 and 1985.But as pointed out by respondent's counsel, the telephone number of the respondent 844346, which was in his house in 1984, has been shifted in the year 1985 to his business premises. The same number finds a place in the name of Shanmugham in the telephone directory for the year 1985 in the address of his business premises. Therefore, the contention of the petitioners that the respondent has removed the telephone from his residence with the oblique purpose of preventing the creditors from contacting him has no force. Actually, the same telephone number appears in the name of the respondent, but in a different address viz, in his business premises. When such being the case, the petitioners ought to have contacted the respondent in his business premises. The evidence let in on the side of the petitioners only shows that they tried to contact the respondent only in his residential house, but he was not available. As already pointed out, the Amin served summons in the business premises of the respondent. That shows, the respondent was available certain times in his business premises.
18. As to the actual visit of the 2nd petitioner to the house of the respondent to demand money, he would as P.W. 2 state only about one visit during December 1985 and he was not accompanied by any person even during that visit. This visit has been made just before the filing of the petition. The suit notice sent to the residential address of the respondent, which was returned unserved also was just prior to the filing of the Insolvency petition. Having decided to file the petition, the petitioners have chosen to send notice and also claim to have visited the house of the respondent for which there is no corroboration. As has been held in The Audilakshmi Venkateswara Iron Traders v. Mayavanthi Jhamandas, (1978) 2 Mad LJ 356, the petitioning creditors, who have chosen to visit the house of the debtor to prove that he was not available, should take the elementary precaution of having their conduct and act corroborated by the testimony of independent witnesses and for this purpose, they should also take the additional precaution of taking such witnesses along with them so that matters might not be doubted at a later stage, when it came up for scrutiny in Courts of law. In such circumstances, particularly when the respondent was having a business premises, where the telephone has been shifted from his residence and where he was available and to which address no notice has been sent nor any attempt has been made by the petitioning creditors to contact him in that address, it cannot be safely held that the petitioning creditors have proved the act of insolvency against the respondent under Section 9(d)(ii) and (iii) of the Act.
19. Even assuming that by virtue of the two notices having been returned unserved with the endorsement that the respondent was not found, on that basis, even if it is concluded that an act of insolvency has been established under Section 9(d)(ii), still, in this case, since the respondent has contended that he is able to pay the debts, it has to be seen whether he substantiates that contention. If he substantiates that contention, even if the debtor-respondent committed an act of insolvency, still the petition is liable to be dismissed. According to the petition, the total debts due to the three petitioners inclusive of the debt due to the wife of the 2nd petitioner comes to Rs. 2,32,500/-. Interest is claimed at heavy rates of 24% and 36%. Accepting the interest as claimed, the total amount as per the petition comes to only about Rs. 3,77,000/. .According to the petitioners, though the respondent owns a number of properties, he has been selling one after the other and therefore, it will be difficult for the creditors to recover the amount from him. Excluding the properties sold by the respondent, including the one sold after the filing of the petition under Ex. P- 16, still he has two houses. In the reply statement filed by the petitioners, they have valued Door No. 17, C.N.K. Street, Triplicane, Madras-5 at Rs. 4,00,000/-. As such, the respondent, who is entitled to half share in that house, would be entitled to at least Rs. 2,00,000/- towards his share, though according to the respondent, that house is worth about Rs. 7,00,000/- and that his share would be Rs. 3 1/2 Lakhs. Further, with respect to Door No. 18, Murugappa Achari Street, Triplicane, Madras, which also belongs to the respondent, he had entered into an agreement to sell the rear portion to one M. P. Damodaran (P.W. 4) for a sum of Rs. 3,10,000/- and had received an advance of Rs. 1,35,000/-. But the respondent did not actually sell that property as seen from the evidence of P.W. 4. With respect to this house also, the respondent is still entitled to about rupees two lakhs. Besides, he is carrying on business. Therefore, the respondent will being a position to satisfy the debts of the petitioners including reasonable interest from out of the estate available with him.
20. The petitioners have not stated at there are other creditors whose debts also have to be satisfied by the respondent. The respondent has categorically stated that he is not liable to pay any other debt. It is also seen, that the 2nd petitioner had entered into an agreement with the respondent to purchase Door No. 31, Venkatesa Naicken Street, Chepauk, Madras-5, which was later sold under Ex. P-15, and also paid an advance of Rs. 50,000/-. It is the admitted case of both parties that the transaction did not fructify. According to the 2nd petitioner, at the request of A. V. Subbiah, he did not press his agreement and permitted the respondent to sell that house to a third party for a higher price and discharge his debts. The respondent after selling that house property has not actually chosen to discharge the petitioners' debts though he pretended to do so as discussed earlier by making a recital in the sale deed Ex. P-15 and also through the evidence of R. W. 1. But still without verifying whether the amount has been paid or not, the 2nd petitioner has chosen to advance a further sum of Rs. 20,000/- to the respondent subsequent to the sale deed, under Ex. P-15. He had security for some of the debts but he has not chosen to proceed against the property given as security but filed the insolvency petition.
21. In the decision reported in S. A. Ramalinga Mudaliar v. T. K. Ratna Mudaliar, , a Bench of this Court had occasion to consider the scope of 'other sufficient cause' occurring in Section 13(4)(b) of the Act, by which the Insolvency Court has to dismiss the petition filed by the creditors to adjudge the debtor as insolvent. In that decision, the Bench has held as follows: -
"The words 'other sufficient cause' in Section 13(4)(b) should be interpreted in the widest possible manner and not ejusdem generis in relation to the earlier clauses in section. Adjudication of a debtor as insolvent changes his status, vests his entire property in the Official Assignee and limits his capacity to do business or even acquire property. Under Section 12 of the Presidency Towns Insolvency Act a debtor would be liable to be adjudicated insolvent by an unsecured creditor having a claim for more than Rs. 500/- if the former had committed an act of insolvency within three months of the petition. But, the right of such a creditor to adjudicate the debtor a bankrupt is not a weapon available to him to be used to serve any ulterior purpose or to be used vindictively. If the object of the adjudication is not the result of a genuine desire to have the property of the debtor administered in insolvency, but one solely with a view to disgrace him or to utilise the machinery of Court for other purposes, the petition cannot be said to be a bona fide one. Section 13 gives power to the Court in those cases to dismiss it..............It cannot be said that adjudication of a debtor as insolvent is one of the remedies open to a creditor and it will be for him to choose whether he is to take the thorny path of execution of the decree or adopt a short cut of adjudicating the debtor an insolvent. An adjudication of a debtor as a bankrupt is not a method of collecting a debt, though as a result of it, the creditor may get paid. Essentially, an adjudication brings about a change in the status of a debtor and enables the Official Assignee or receiver in whom the property of the debtor gets vested to administer or sell it to pay off his creditors. It is only a particular class of creditors that can file a petition for adjudication. And no absolute right is given to them to obtain an adjudication as the Court will dismiss the petition if the conditions laid down in S. 13 are satisfied."
In that decision, This Court has further held that the fact that the debtor had been a recalcitrant debtor and was unable to pay his debts could not justify the creditor, purely out of spite and with no other object in view to adjudge him bankrupt.
22. Keeping the above laid down principles in mind, if we consider the facts of the case on hand, we find that the creditors have satisfied that the debtor-respondent owes them nearly rupees two lakhs. Though the creditors cannot claim the entire interest as recited in the promissory notes, which is certainly exorbitant and usurious in nature, the creditors will be entitled to interest at a reasonable rate. The principal amount due to the creditors is more than rupees two lakhs. The property of the respondent still available with him is sufficient to satisfy the debts of the creditors. No doubt, the conduct of the debtor-respondent in denying the liability of the creditors-petitioners and selling his properties with a false recital that such a sale is to discharge the debts due to the petitioning creditors is that of a vexatious and recalcitrant debtor and also with a view to delay the payment to the petitioning creditors. But that by itself will not give a right to the petitioning creditors to choose a remedy available under the Insolvency Act instead of proceeding against the available property of the debtor-respondent. Knowing the behavious and conduct of the debtor-respondent, still the 2nd petitioner has chosen to advance a further sum of Rs. 20,000, even after the respondent-debtor has not chosen to discharge his earlier debts by selling one of his properties under Ex. P. 15. As already pointed out, the 2nd petitioner has planned to purchase the house property which was sold under Ex. P. 15, and also made an advance of Rs. 50,000 but that transaction did not go through. Therefore, it appears that the petitioning creditors had chosen to the present adjudication proceedings more to disgrace the debtor-respondent rather than to recover the amount due to them, which could have been done under the normal process of law. In the circumstances, even assuming that the debtor-respondent has committed an act of insolvency, which actually has not been established, the petition is liable to be dismissed, under Section 13(4)(b) of the Act, both on the ground that the debtor-respondent is able to pay his debts and also for 'other sufficient cause'.
23. In the result, the insolvency petition fails and the same is dismissed. No costs.
24. Petition dismissed.