HC - The effect of declaring an individual as an insolvent would be that, his liability towards his creditors, over and above the value of his assets, gets wiped away. When such is the extraordinary benefit conferred by law, a person, claiming it, is supposed to approach the Court with true facts and figures. Time and again Courts held that if it emerges that a petitioner in such cases resorts to suppression of facts or makes wrong statements, with the object of procuring the benefit, the petitions are liable to be dismissed. when IP Insolvency petition may be dismissed.


IN THE HIGH COURT OF JUDICIATURE, ANDHRA PRADESH, AT HYDERABAD

THE HON’BLE SRI JUSTICE L.NARASIMHA REDDY

C.M.S.A.No.26 of 2010

Dt:30-08-2010

Between : 
Chittineni Mohana Rao                                                                                                              ..Appellant

And

Jagarlamudi Subbarao & others
       ..          Respondents


Counsel for the appellant: Sri Nimmagadda Satyanarayana

Counsel for respondents      :
  
? CASES REFERRED : 

2005 (1) ALT 407

JUDGMENT: 

The petitioner in I.P.No.6 of 2002, on the file of the Senior Civil Judge, Parchur, is the appellant herein.  He filed the I.P., under Section 10 of the Provincial Insolvency Act (for short ‘the Act’),  with a prayer to adjudicate him as insolvent.  He stated that he became indebted to various persons to the extent of Rs.16,97,422/-, the particulars of which, are furnished in petition ‘A’ Schedule.   

In ‘B’ Schedule thereof, he furnished the particulars of two items of immovable property, and he stated that his share in it is only 1/6th, totalling to Rs.2 lakhs.  According to him, his liability exceeded his assets, by about Rs.15 lakhs, and made a prayer that he be declared as insolvent. 

The I.P was opposed by the respondent Nos.3, 5, 12, 13, 15, 16 and 18, and others remained ex parte.  According to them, the loans said to have been borrowed by the appellant are fictitious, and his effort was only to avoid the repayment of genuine debts, which are far below the value of the assets, held by him.  Several facts pleaded by the appellant were denied by them.

Through its order dated 17-08-2006, the trial Court dismissed the I.P.   The appellant filed A.S.No.161 of 2006 in the Court of District Judge, Ongole.  The appeal was dismissed on 13-04-2010.  Hence, this Civil Miscellaneous Second Appeal.

Sri Nimmagadda Satyanarayana, learned counsel for the appellant submits that the trial Court as well as the lower Appellate Court, have proceeded as though, the appellant is under obligation to prove any debt, mentioned in ‘A’ schedule, and that such an approach is contrary to law.  He contends that the minor discrepancy as to the date of marriage of the daughter of the appellant, or the lack of full acquaintance, on the part of the witnesses, examined by the appellant, as to the details of debts, ought not to have been treated as factors, for rejection of the I.P or the Appeal.

The appellant wanted himself to be declared as insolvent. 
He furnished the details of his alleged liabilities, in ‘A’ schedule,
to the tune of Rs.17 lakhs, and assets held by him, in ‘B’ schedule.  He is said to have borrowed different amounts, ranging from Rs.7,500/- to Rs.1,77,000/-, from as many as 42 persons.  The assets shown in the ‘B’ schedule are an extent of about 4 acres of wet land, and an RCC building.  Out of the 46 respondents, only 7 contested the I.P., and specifically pleaded that most of the debts are fictitious.  It is in this context, that the trial Court framed only one point for its consideration, and proceeded to decide the matter.
On behalf of the appellant, PWs 1 and 2 were examined and no documentary evidence was adduced.  On behalf of the contesting respondents, RWs 1 to 3 were examined and Exs.B-1 and B-2 were filed.  The I.P was dismissed, and the order therein was affirmed in the appeal.

It is no doubt true that in a petition filed under Section 10 of the Act, a proposed insolvent has only to satisfy the Court, as to existence of prima facie grounds, which, in turn, must disclose that the assets held by him are not adequate to meet the liabilities.  The detailed consideration, such as the entitlement of any creditor to recover the amount, the claims, if any, made against the assets held by the proposed insolvent, etc., need to be considered at a later stage.  At the same time, an I.P. cannot be ordered, just by making reference to the schedules of assets and liabilities.  Even to establish a prima facie case, evidence needs to be adduced.  Reference in this context may be made, to the judgment of this Court in T. CHANDRASEKHARAIAH v. D. SREERAMULU CHETTY[1].

In the instant case, the appellant is said to have borrowed from as many as 42 persons. Not a single document was placed before the Court, whether in the form of decrees, passed against him, or notices received from the creditors.  Further, he stated in the petition that he has only 1/3rd share in item-I, and 1/6th share in
item- II of petition ‘B’ schedule properties.  A specific statement was made by him, to the effect that his daughter was married in the year 1986, and she too is entitled to a share in the properties.  The contesting respondents have filed Ex.A-1, which discloses that the daughter of the appellant gave birth to a child in the year 1984 itself.  The appellant deliberately stated 1986, as the year of the marriage of his daughter, keeping in view the amendment caused to the provisions of the Hindu Succession Act.  Ex.B-2 discloses that after the death of the father of the appellant, the properties were transferred in his name and mutation was effected in the revenue records.

The effect of declaring an individual as an insolvent would be that, his liability towards his creditors, over and above the value of his assets, gets wiped away.  When such is the extraordinary benefit conferred by law, a person, claiming it, is supposed to approach the Court with true facts and figures.  Time and again Courts held that if it emerges that a petitioner in such cases resorts to suppression of facts or makes wrong statements, with the object of procuring the benefit, the petitions are liable to be dismissed.

In the instant case, the evidence adduced by the petitioner was scanty.   PWs 1 and 2 admitted that they are not aware of the details of the debts, incurred by the appellant.  The statement as to the year of marriage of the daughter of the appellant stated in the I.P., was proved to be wrong. Though the appellant was shown as the absolute owner in the records, and there did not exist any coparceners, he made an attempt to impress the Courts that he holds a part of the property.  The trial Court took the view that the assets are sufficient to meet the liability towards the genuine debts.

No substantial question of law arises for consideration in this Civil Miscellaneous Second Appeal.  It is accordingly dismissed.

There shall be no order as to costs.

_______________________
L. NARASIMHA REDDY, J.
Dt.30-08-2010
Note:
L.R copy to be marked.
(B/O)
KO


[1] 2005 (1) ALT 407

No comments:

Post a Comment