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2008 DIGILAW 302 (KAR)

I. R. Narayana Reddy v. Yaram Ramana Reddy

2008-06-17

H.G.RAMESH

body2008
JUDGMENT H. G. Ramesh, J. This appeal by one of the creditors of respondent No.1 is directed against the order dated 7.1.2008 passed by the Court of the Principal District Judge, Bellary allowing the application-I.A.No.24 filed by respondent No.1 (debtor) to withdraw his petition for insolvency in I.C. No.15/2003 filed by him under Section 7 of the Provincial Insolvency Act, 1920 (‘the Act’). 2. I have heard Sri T.N. Raghupathy, learned Counsel appearing for the appellant and Sri V.M. Sheelvant, learned Counsel appearing for respondent No.1 and perused the impugned order which reads as follows: “SYS files IA No. under Section 25 of Insolvency Act. Respondents & their Counsels absent. Since petitioner is not seeking to reserve his right to file petition, no need to hear respondent on application. Hence application allowed petition dismissed as withdrawn.” 3. The learned Counsel appearing for the appellant submits that the Court below had erred in law in granting leave under Section 14 of the Act to respondent No.1 to withdraw the insolvency petition without affording an opportunity of hearing to the creditors. In support of his submission, he relied on a judgment of the Lahore High Court in FIRM JAGAN NATH Vs. SITA RAM (AIR 1939 Lahore 190) and specifically invited my attention to the following observations made in the said judgment: “............ On the other hand it seems very likely that after having delayed the insolvency proceedings for about two years and apprehending that the claims put forward by the wife and the sons would be decided against them soon, he wanted to delay or defeat the claims of the creditors by withdrawing the petition for insolvency and again leaving them to pursue their claims in a Civil Court. The finding of the learned Insolvency Court that the petition was mala fide was in the circumstances amply justified. The learned District Judge has merely remarked that in his opinion a debtor should always be allowed to withdraw his petition for insolvency unless he is guilty of some misconduct in the course of the insolvency proceedings. This does not appear to me to be the correct principle. The interest of the creditors also ought to be taken into consideration in deciding the matter. This does not appear to me to be the correct principle. The interest of the creditors also ought to be taken into consideration in deciding the matter. The creditors in this case had been dragged into the Insolvency Court and after the proceedings had gone on for about two years, there was no reason why they should again be compelled to go back to the Civil Court. It was urged that only one of the creditors, namely the present petitioner, had opposed the petition for withdrawal, but it appears from the record that the bulk of the debts are due to him. In view of all the circumstances of the case I accept this petition for revision, and setting aside the orders of the Courts below dismiss the petition for withdrawal with costs throughout.” (Underlining supplied) I am in respectful agreement with the views expressed in the above judgment. It is relevant to state that Section 14 of the Act mandates that no insolvency petition shall be withdrawn without the leave of the Court. As could be seen from the impugned order referred to at para 2 above, leave was granted to respondent No.1 (debtor) to withdraw the insolvency petition without affording an opportunity of hearing to the creditors. This is not correct in law. The Court below ought to have afforded an opportunity of hearing to the creditors before considering granting of leave under Section 14 of the Act for withdrawal of the insolvency petition. Accordingly, the impugned order is set aside and the matter is remitted to the Court of the Principal District Judge, Bellary for reconsideration in accordance with law. Appeal disposed of.