I only wish to refer to the Decision reported in Chenchuramana v. Arunachalam
[AIR 1935 Mad 857] and G. Curuvamma v. C.Gopalam [AIR 1969 AP 338] wherein it has
been held that Section 9(1) (c) is a condition precedent to the filing of the petition, that is to
say, the petitioning creditor must, on the day when he presents his petition, have in view some
act of insolyency which the debtor has committed within the preceding three months. It has
also been held in the above decision that an Insolvency Petition cannot be presented where
three months have expired during the alleged act of insolvency. The learned District Judge
has rightly allowed the appeal before him after considering the above propositions of law and
there is nothing to interfere with the same. The contention of the revision petitoner that the
debtor has admitted that he is unable to pay and therefore, the finding of the lower appellate
court that he had not committed an act of insolvency is improper cannot hold water in view of
the fact that the petition filed by the petitioner is a creditor petition and not a debtor petition.
It is only in a debtor petition, where the debtor has made a statement that he is unable to pay
the amount due to his creditors, the said representation can be taken as an act of insolvency
and on that basis, he could be adjudged as an insolvent. In view of the fact that the present
petition is a creditor petition, it cannot be done. In that view also, I hold that the order passed
by the learned District Judge is well founded and does not call for any interference by this
court.
Chellathurai Nadar v. Ramaswami Pillai
AIR 1966 Mad. 143
GOVARDHAN, J. - 2. The petitioner’s case is as follows: The petitioners field a petition
under Section 9 of the Provincial Insolvency Act to adjudge the first respondent as an
insolvent, contending that the first respondent who has borrowed Rs. 100/- from the petitioner
on a promissory note had committed an act of insolvency on 25-8-1979 by entering into an
agreement of sale of the 8th respondent. The first respondent has borrowed to the tune of
Rupess 48, 230-50/-under various respondents 2 to 7. The property for which he had entered
into an agreement is the only property owned by him. The 5th and 6th respondents have filed
suits against the first respondent for the recovery of the amounts due to them under
promissory notes. The 4th respondent has been transposed as the second petitioner after the
death of the first petitioner.
3. The first respondent in his counter has admitted the borrowing from respondents Nos. 2
to 7. He has stated that he is not in a position to pay of the dues and that he is entitled to the
benefits under the provisions of the Tamil Nadu Debt Relif Act. According to the first
respondent, he had entered into an agreement of sale of the property with the 8th respondent
with the bona fide belief of paying off his debts out of the consideration.
4. The respondents 2, and 3 have filed separate counters contending that the first
respondent has borrowed money from them on executing promissory notes. They have also
stated that the first respondent has filed the suit for specific performance. The 5th and 6th
respondents to whom the first respondent in collusion with the 8th respondent has filed the
suit for specific performance. The 5th and 6th respondents to whom the first respondent owes
certain amount, had filed two separate suits against them.
5. The 8th respondent in his separate counter has stated that the promissory note in favour
of the first petitioner is a sham and nominal one and the first petitioner was set up by the first
respondent to defeat the interests of the creditors. According to the 8th respondent, an
agreement of sale in his favour was executed by the first respondent on 25-5-1979 and the
petition having been field beyond a period of three months is not maintainable.
6. On the above pleadings the learned Sub-judge held an enquiry and passed an order
adjudging the first respondent as insolvent.
7. Against the said order, the 8th respondent had preferred an appeal before the District
Court.
8. The learned District Judge has held that the petitoner have failed to establish that the
first respondent has committed any act of insolvency and allowed the appeal dismissing the
insolvency petition.
9. It is against this judgment, the 2nd petitioner had preferred the Civil Revision petition.
10. The learned cousnsel appearnig for the revision petitioner would argue that the
petitioner who has filed the Insolvency Petition to adjudge the first respondent as an
insolvency died and the 4th respondent from whom also the first respondent had borrowd
money, had been transposed as the secnd petitioner and after the enquiry, the trial court has Ibrahim Chhitubhai v. A. G. Pancholi Vakil 15
held that the first respondent has committed an act of insolvency by entering into an
agreement of sale and declared him as an insolvent and the 8th respondent who had entered
into an agreement of sale with the first respondent, had preferred an appeal to the District
Court and the District Court has held that the execution of an agreement of sale would not
amount to transfer of an interest in the property and therefore, it cannot be stated that there is
an act of insolvency committed by the first respondent and that the District Court has also
held that the petition to adjudicate the first respondent and insolvent having been filed beyond
a period of there months, the petition is not maintainable and tha said finding of the District
Court is erroneous on the ground that the debtor viz., the first respondent himself has stated
that he is unable to pay the debts to the creditors. Section 2(i) of the Provinical Insolvency Act
defines a transfer of property as one includes a transfer of any interest in the property and the
creation of a charge upon the property. By virtue of the agreement in which 8th respondent
had with the first respondent, there is no transfer of any interest in the property for which the
said agreement has been entered into and there is no creation of any charge on the property.
Section 54 of the Transfer of property Act does not by itself create any interest or charge over
the property. Therefore, under the provisions of the Transfer of Property Act, the execution of
an agreement for sale cannot be h eld to be sufficient to attract the provisions of Section 6 of
the Provinical Insolvency Act. It is only if the debtor conveys a right which he had in the
property, in favour of another, that too with the intention of defeating the interests of his
creditors, Section 6 of the Provincial Insolvency Act can be attracted. In the present case, the
8th respondent who has entered into an agreement of sale with the first respondent on 25-5-
1979, has issued the notice under Ex. A.2 after nearly six months since the agreement
provides for six months period for the execution of one sale deed. In this notice, the 8th
respondent had expressed his readiness and willingness to purchase the property and called
upon the first respondent to have the sale deed executed. The first respondent had sent a reply
to the 8th respondent in which he has stated that some of the creditors are contemplating to
file Insolvency Petition. Within two days of the said notice, the Insolvency petition has been
filed by first petitioner. The version of the second petitioner who is the Revision Petitioner
herein that the first respondent had colluded with the 8th respondent and had filed the suit for
specific performance, there-fore cannot be given any weight on the ground that there is no
evidence for the alleged collusion between them. On the other hand, from the correspondence
and the fact of the filling of the Insolvency Petition, it appears that the first respondent and
first petitioner have colluded together. The filling of the Insolvency petition even before the
8th respondent has filed the suit for specific performance, would only indicate that there
cannot be any collusion between the first respondent and the eighth respondent and the
version of the eighth respondent that there is collusion between the first petitioner and the first
respondent is more probable. As I have already observed, mere agreement of sale by debtor
does not confer any transfer of interest. Therefore, the execution of the agreements of sale by
debtor cannot be considered as an act of insolvency committed by the first respondent. The
Insolvency petition was relied on 21-12-1979 nearly after six months after the agreement
dated 25-5-1979. Section 9(1) (c) of the Provincial Insolvency Act contemplates the filing ofan Insolvency Petition only within three months of the alleged act of insolvency. Therefore
even assuming the act of execution of the agreement is an act of insolvency the filing of the
insolvency petition by the first petitioner is barred by limitation cannot be disputed. In this 16 Ibrahim Chhitubhai v. A. G. Pancholi Vakil
connection, I only wish to refer to the Decision reported in Chenchuramana v. Arunachalam
[AIR 1935 Mad 857] and G. Curuvamma v. C.Gopalam [AIR 1969 AP 338] wherein it has
been held that Section 9(1) (c) is a condition precedent to the filing of the petition, that is to
say, the petitioning creditor must, on the day when he presents his petition, have in view some
act of insolyency which the debtor has committed within the preceding three months. It has
also been held in the above decision that an Insolvency Petition cannot be presented where
three months have expired during the alleged act of insolvency. The learned District Judge
has rightly allowed the appeal before him after considering the above propositions of law and
there is nothing to interfere with the same. The contention of the revision petitoner that the
debtor has admitted that he is unable to pay and therefore, the finding of the lower appellate
court that he had not committed an act of insolvency is improper cannot hold water in view of
the fact that the petition filed by the petitioner is a creditor petition and not a debtor petition.
It is only in a debtor petition, where the debtor has made a statement that he is unable to pay
the amount due to his creditors, the said representation can be taken as an act of insolvency
and on that basis, he could be adjudged as an insolvent. In view of the fact that the present
petition is a creditor petition, it cannot be done. In that view also, I hold that the order passed
by the learned District Judge is well founded and does not call for any interference by this
court. In the result, the Civil Revision Petition is dismissed.
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