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Civil Revision No. 628 of 1968, decided off 24th. September 1968.

Framing of issues ‑ Only appropriate method of pinpointing questions- involved‑Insolvency Judge framing issues in insolvency petition --Held, nothing wrong in procedure adopted.

Periya Karuppan Chettiar v. D. R. Angappa Chettiar and" others A I R 1925 Mad. 483 (1); Sita Ram v. Hukam Chand A I R 1927 Lah. 354; Nihal Chand v. Gela Ram A I R 1930 Lah. 75; Bishan Singh v. Man Singh A I R 1935 Lah. 213 (1) and Madan Lal Jhunjhunwalla v. H. H. The Nawab Sayed Reza Ali Khan Baha dur Mustaid Jung A I R 1940 Cal. 244 ref.

Debtors not bringing on record sufficient material to satisfy Court of existence of prima facie grounds for belief in their in ability to pay debts‑No account books produced either‑Court after examining debtors "as to their conduct and dealings" drawing inference adverse to debtors ‑ Requirement of proviso to S. 24 (1) (a), meld, not exceeded as regards standard or quan tum of proof.

Although from the plain reading of the proviso to clause (a) of subsection (1) of section 24 of the Act, the proof of the exis tence of pirma facie ground for believing that the petitioner is unable to pay his debts should be sufficient to satisfy the Court, there is nothing to show that sufficient material had been brought on the record by the petitioner to satisfy the Court on the existence of such prima facie grounds. On the contrary, it is abundantly clear that failure on the part of the petitioner to produce their account books coupled with the inference drawn by the Court after having examined them as debtors "as to their conduct and dealings" in terms of subsection (2) of section 24 would indicate that the conclusions arrived at by the Courts below are unexceptionable and they did not insist on a standard or quantum of proof in excess of the legal requirement.

Ganeshi Lal v. Dwarka Ram A I R 1927 Lah. 27 distinguished.

S. M. Almas Ali for Petitioners.

Ghulam Muhammad and Muhammad Amir petitioners filed an application under section 7 of the Provincial Insolvency Act, 1920 for being adjudged insolvents. Nine creditors were: impleaded as respondents in the application in which it was alleged that the debts incurred by the petitioners accumulated to Rs. 12,400 as against their assets worth Rs. 3,209 only and, therefore, they were unable to clear their debts for which they were being coerced by the respondents.

2. After issuance of notice to the respondents and its publication in the official Gazette, only one of the creditors, namely, Haji Ghulam Rasul respondent came forward to resist the application. He traversed the averments made by the peti tioners and alleged that they had sufficient means to pay his debt which amounted to Rs. 3,500. Having framed issues relating to the competency of the application, the inability of the petitioners to pay their debts and the amount of debts payable by them, the learned Insolvency Judge, not being satisfied that the petitioners were unable to pay their debts, dismissed the petition.

3. The appeal filed by the petitioners against the aforesaid order before the learned District Judge was dismissed vide the impugned order dated the 20th of June 1968, in which a clear finding was given that the petitioners were doing well in their business and had filed the present petition only with a view to defeat their creditors. They have challenged this order in the present Civil Revision.

4. The sole contention raised by the learned counsel for the petitioner was that the framing of issues by the trial Court clearly indicated that the application was being treated as a regular suit and the special procedure laid down in the Insolvency Act was not kept in view. It was particularly contended that a prima facie existence of grounds for believing that the peti tioners were unable to pay debts should have been sufficient for the adjudication of the petitioners as insolvents. Reliance was placed in this regard on the proviso to part (a) of subsection (1) of section 24 of the Act. In support of his contention the learned counsel cited Periya Karuppan Chettiar v. D. R. Angappa Chettiar and others (A I R 1925 Mad. 483), Ganeshi Lal v. Dwarka Ram (A I R 1927 Lah. 27) Sit a Ram v. Hukam Chand (A I R 1927 Lah. 354), Nihal Chand v. Gela Ram (A I R 1930 Lah. 75) and Bishan Singh v. Man Singh (A I R 1935 Lah. 213 (1)).

5. Before proceeding to consider the merit of the contention raised by the learned counsel, it would be necessary to examine the relevant provisions of the Provincial Insolvency Act which are contained in sections 5, 12 and 18. They are reproduced below:‑

"5. (1) Subject to the provisions of this Act, the Court, in regard to proceedings under his Act, shall have the same powers and shall follow the same procedure as it has and follows in the exercise of original civil jurisdiction.

(2) Subject as aforesaid, High Courts and District Courts, in regard to proceedings under this Act in Courts subordinate to them, shall have the same powers and shall follow the same procedure as they respectively have and follow in regard to civil suit.

12. Every insolvency petition shall be in writing and shall be signed and verified in the same manner prescribed by the Code of Civil Procedure, 1908, for signing and verifying plaints.

18. The procedure laid down in the Code of Civil Pro cedure, 1908, with respect to the admission of plaints, shall so far as it is applicable be followed in the case of insolvency petitions."

From the plain reading of the above three provisions it is clear that sections 12 and 18 are rather specific and narrower an scope. The former makes incumbent the signing and verify ing of the petition in the manner prescribed for a plaint under the Code of Civil Procedure, whereas the latter is confined to the adoption of same procedure in regard to the admission of insolvency petitions as laid down for the admission of plaints sunder the C. P. C. It would be seen that a provision more generic in scope as contained in section 5 has been followed by these two specific provisions which "Cannot be construed in derogation of the scope of the former. It would also be pertinent in this context to refer to the provision contained in section 141, C. P. C. which lays down that the procedure laid down in regard to suits in the C. P. C. shall be followed in all proceedings in any. Court of Civil jurisdiction as far as it can be made applicable. From the aforesaid provision it is abundantly clear that there was nothing wrong in the procedure adopted by the learned Insolvency Judge, including the framing of issues to which exception was taken in particular. In fact, in the absence of any specific bar to the adoption of such a procedure, the framing of issues would in my opinion be the only appropriate method of pin‑pointing the questions involved and their determination. The learned counsel could not cite a single authority in support of his contention. In Madan Lal Jhunjhunwalla v. H. H. the Nawab Sayed Reza Ali Khan Bahadur Mustaid Jung (A I R 1940 Cal. 244), the learned Judges had examined the question of the applicability of section 86 of the C. P. C. to Insolvency proceedings within the scope of section 141, C. P. C. and a negative finding was given on the ground that Insolvency proceedings not commencing with a plaint were not tantamount to a suit to which alone sec tion 86 was in terms applicable. The position in the instant case, however, is quite different.

6. The second limb of the argument raised by the learned .counsel was that under the proviso to clause (a) of section 24 of the Insolvency Act, the existence of prima facie ground for believing that the debtor‑petitioners were unable to pay their debts should have been deemed sufficient to justify an order of adjudication. For a proper appreciation of the argument, the relevant provisions contained its sections 22 and 24 shall have to be examined. Section 22 makes it obligatory on a debtor inter alia to produce all books of accounts and the inventories of his properties thereafter, when his petition has been admitted. Section 24 reads as follows :‑

"24. (1) 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 of the following matters, namely ;

(a) that the creditor or the debtor, as the case may be, is entitled to present the petition:

Provided that, where the debtor is the petitioner, he shall, for the purpose of proving his inability to pay his debts, be required to furnish only such proof as to satisfy the Court that there are prima facie grounds for believing the same and the Court, if and when so satisfied, shall not be bound to hear any further evidence thereon;

(b) that the debtor, if he does not appear on a petition: presented by a creditor, has been served with notice of the order admitting the petition; and

(c) that the debtor has committed the act of insolvency alleged against him.

(2) The Court shall also examine the debtor, if he is present,, as to his conduct, dealings and property in the presence of such creditors as appear at the hearing, and the creditors shall have the right to question the debtor thereon.

(3) The Court shall, if sufficient cause is shown, grant time to the debtor or to any creditor to produce any evidence which appears to it to be necessary for the proper disposal of the petition.

(4) A memorandum of the substance of the examination of the debtor and of any other oral evidence given shall be made by the Judge, and shall form part of the record of the case."

Although from the plain reading of the proviso to clause (a) of subsection (1) of section 24 of the Act, the proof of the existence of prima facie ground for believing that the petitioner is unable to pay his debts should be sufficient to satisfy the Court, there is nothing to show that sufficient material had been brought on the record by the petitioner to satisfy the Court on the existence of such prima facie grounds. On the contrary, it is abundantly clear that failure on the part of the petitioner to produce their account books coupled with the inference drawn by the Court, after having examined them as debtors "as to their conduct and dealings" in terms of subsection (2) of section 24 would indicate that the conclusions arrived at by the Courts below are unexceptionable. Having perused their judgments. I am convinced that they did not insist on a standard or quantum of proof in excess of the legal require ment.

7. Since under the proviso to subsection (1) of section 75 of the Act, after the dismissal of an appeal by the District Judge against an order of the Insolvency Court, only the revisional jurisdiction of this Court with its limitation of scope could be invoked, I am of the view that there has been no illegality or material irregularity, warranting the interference of this Court. In Ganeshi Lal v. Dwarka Ram an authority relied upon by the learned counsel for the petitioners, it was held by the learned Judge that failure to keep account books did not ipso facto disqualify a man from being declared as insolvent. From the facts found, the applicants were deemed to have made out a prima facie case. This was an appeal against the order of the learned District Judge which proceeded mainly on the non‑production of the account books by the applicant, the evidence by both sides being very meagre. On the contrary, in the instant case, the Courts below after having perused the evidence on the record gave a concurrent finding that the petitioners were in a position to pay off their debts. The authority has, therefore, no bearing on the facts of the case and as such does not avail to the petitioners. Likewise, the other authorities relied upon by the learned counsel proceed on different and distinguishable facts and I do not, therefore, consider it necessary to discuss them.

8. In consequence, the petition fails and is hereby dismissed in limine.

S. A. H.

Petition dismissed in limine.

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