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1951 DIGILAW 53 (KER)

Ramayyan v. Official Receiver

1951-06-22

GANGADHARA MENON, KOSHI

body1951
Judgment :- 1. This is an appeal from an order annulling the adjudication order passed in I.P. No. 10 of 1120 on the file of the Trichur District Court. The petitioning creditor, who is the appellant before this Court, held a usufructuary mortgage for an amount of Rs. 8000/- over the debtor's properties in the erstwhile Cochin State. The document in that behalf was executed by the debtor's natural guardian, his mother. It would appear, the mother as guardian had borrowed another sum of Rs. 2000/- from the mortgagee on behalf of her minor son and executed a pro-note in respect thereof. This pro-note was dated 28.10.1119. Not long afterwards the minor came of age and on 13.8.1120 he assigned the mortgaged properties to the 1st respondent in this appeal for a consideration of Rs. 12,250/-. The appellant's mortgage debt was reserved for payment by the vendee, but no provision was made for the debt due under the promissory note. Founding this sale in favour of the 1st respondent as an act of insolvency, the appellant on 6.11.1120 filed an application, since registered as I.P.No 10 of 1120, to get the debtor adjudged an insolvent. The debtor's mother was also made a counter petitioner to that application and in due course the court adjudged the debtor an insolvent. This order was passed on 6.2.1121. Both counter-petitioners remained ex-parte in that proceeding. A vesting order in favour of the Official Receiver, Trichur, is embodied in the adjudication order. The adjudication order was soon followed by an application under S.53 and 54 of the Insolvency Act by the Official Receiver to annul the sale deed in favour of the 1st respondent. This application was laid on 26.5.1121. The 1st respondent in her turn filed the application giving rise to this appeal on 21.6.1121 to annul the adjudication order on the ground that the promissory note alleged to have been executed by the debtor's mother in favour of the petitioning creditor was a bogus and fictitious one. The Official Receiver's application and the petition to annul the adjudication order were heard together by the learned Additional District Judge, Trichur and he allowed the application to annul the adjudication order. The present appeal is directed against that order. The Official Receiver's application and the petition to annul the adjudication order were heard together by the learned Additional District Judge, Trichur and he allowed the application to annul the adjudication order. The present appeal is directed against that order. Consequent on the annulment of the adjudication order the learned judge dismissed the Official Receiver's application under S.53 and 54 and the appeal therefrom is A.S. No. 64 of 1123 which was heard along with the present appeal. We are disposing of that appeal by a separate judgment. The courts powers to annul an adjudication order are defined in S. 35 of the Insolvency Act and that section so far relevant, reads thus: "Where, in the opinion of the Court, a debtor ought not to have been adjudged insolvent or where it is proved to the satisfaction of the Court that the debts of the insolvent have been paid in full, the court shall on the application of the debtor or any other person interested, by order in writing, annul the adjudication and " .................. Though the ground specifically mentioned in the application for annulment was that the debt evidenced by the promissory note was a fictitious debt, the learned judge in the court below has founded his order for annulment on the ground that as the debt was one for which the debtor was not personally liable, the court ought not to have adjudicated him an insolvent. The learned judge's finding is to the effect that the debt was not fictitious but true. 2. A point was raised that the decision is rested on a ground not mentioned in the application, but we do not think that there is any substance in it. The application challenges the debt, whole stock and barrel and when the creditor's eligibility to lay the application in insolvency is founded upon that debt it is for him to show that the debt was not only genuine, but also one for the nonpayment of which the debtor could have been personally proceeded against. The only question for our consideration therefore is whether the learned judge's view that the debtor was not personally liable for the debt due under the promissory note executed by his natural guardian is not right. which the debtor had any personal liability. The only question for our consideration therefore is whether the learned judge's view that the debtor was not personally liable for the debt due under the promissory note executed by his natural guardian is not right. which the debtor had any personal liability. The appellant's case however is that since the debtor came of age he had expressly undertaken personal liability and that therefore on the date of the petition in insolvency there was personal liability for the debtor. Hence according to the appellant the adjudication order was quite proper. However, one will look for in vain in the insolvency petition or the adjudication order for any mention that the debt was one for which the debtor had rendered himself personally liable. Even the appellant's Counsel did not dispute this position, but he invited our attention to an affidavit the appellant filed in the insolvency proceeding in proof of the alleged act of insolvency wherein he said express mention was made of the facts and circumstances under which the debtor took upon himself personal liability for the debt. That affidavit is not placed on the record of the present proceeding but the learned Counsel for the appellant relies on a statement contained in the evidence given by his client in this proceeding that all that is contained in the affidavit filed to prove the act of insolvency is true. We are afraid that is a dubious method of leading evidence and we cannot look into the contents of the affidavit to find out what all it contains. The petition as mentioned earlier did not contain any allegation, which would go to show that the debtor was personally liable for the debt incurred by his mother during his minority. Nor does the order refer to any such facts. On the face of the petition it ought to have been dismissed in limine and we have no hesitation therefore in stating that this is a case which easily falls within the spirit and the letter of S.35. 4. The learned judge in the court below thought it proper to refer to the so called statement in the affidavit mentioned which according to the appellant goes to show that the debtor was personally liable for the pro-note debt. 4. The learned judge in the court below thought it proper to refer to the so called statement in the affidavit mentioned which according to the appellant goes to show that the debtor was personally liable for the pro-note debt. We are at one with the learned judge in thinking that those allegations do not go to show that the debtor had undertaken any personal liability for the debt. They may at best mean that on coming of age he did not repudiate the debt. Nothing more can, in our opinion, be read into those passages. 5. It is a common place of the insolvency law that an act of insolvency to serve as the basis of adjudication upon a creditors petition must be an act committed by his debtor and unless there is a personal liability in respect of the debt there is no such relation of the debtor as will serve to support an adjudication order. See the decision in 32 Cochin Law Reports 263 and the decisions referred to therein. An insolvency proceeding is essentially a proceeding in personal and only the personal debts due by the insolvent can be proved therein. These propositions were not disputed by the learned Counsel for the respondent nor did he as stated earlier contend that originally the debtor was personally liable. It was the alleged undertaking that was sought to be made the basis for the liability and for that we could find no foundation on the facts of the case. When the debtor was not personally liable for the debt due to the petitioning creditor and when there is no evidence of any other debt being in existence when the sale deed in favor of the 1st respondent was executed, it can on no account be treated as an act of insolvency. There is therefore no merit in the appeal and we dismiss it with costs. Dismissed.