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2010 DIGILAW 5160 (MAD)

K. Murali Sankar v. K. Karuppiah Konar

2010-11-25

T.RAJA

body2010
JUDGMENT ( 1. ) THE present Civil Revision Petitions have been filed under Article 227 of the Constitution of India, challenging the insolvency proceedings initiated by the contesting respondents viz., K.Karuppiah Konar and L.Mayandi Konar, in I.P. Nos.1 to 3 of 2008 on the file of the Principal District Munsif Court at Srivilliputhur, for adjudicating the petitioner herein along with his brother and sister, arrayed as R1 to R3 therein, as insolvent persons for non-payment of debts borrowed by their deceased father from the contesting respondents. ( 2. ) EVEN though the contesting respondents were duly served, they have neither chosen to appear in person nor were represented through counsel for prosecuting the cases of the year 2008; therefore, the petitions which are inter-connected have been taken up for joint disposal and decided on merits by this Common Order, of course, after hearing the learned counsel appearing for the petitioner. ( 3. ) FOR better appreciation, brief facts of the case, which led to filing of the above Civil Revision Petitions, are narrated below. The first respondent in CRP Nos.2004 and 2006 of 2008, by alleging that N.K.Karuppiah Konar, the father of the petitioner herein, borrowed from him a sum of Rs.5,000/- and Rs.10,000/- on 12.11.2005 and 18.07.2005; and R-1 in CRP No.2005 of 2008, claiming that Karuppiah Konar borrowed Rs.5,000/- from him on 29.06.2006; filed Insolvency Petition Nos.1 to 3 of 2008 before the Principal District Munsif, Srivilliputhur, on the ground that, after the demise of the borrower-N.K.Karuppiah Konar, his legal heirs viz., the petitioner herein and his brother and sister, defaulted to repay their father's debt and as they have no means to repay the debt, they rendered themselves to be declared as insolvents. It is the specific case of the petitioner that his father never borrowed any sum much less the alleged debt amount from the contesting respondents/petitioning creditors and, in the absence of any promissory note evidencing the alleged loan received by Karuppiah Konar, there would not be any difficulty in concluding that the contesting respondents, who are none else than close relatives of the petitioner, initiated the proceedings before the trial court with oblique and ulterior motives. Further, the schedule of properties as shown in the insolvency applications would show availability of sufficient properties to realise the outstanding, if the loan amount is in fact proved to have been borrowed. Further, the schedule of properties as shown in the insolvency applications would show availability of sufficient properties to realise the outstanding, if the loan amount is in fact proved to have been borrowed. However, neither the petitioner nor other legal heirs of the deceased can be held liable in respect of the alleged outstanding when the debt is not proved against the deceased himself. While so, the trial court, without even appreciating the facts and circumstances involved vis-a-vis the requirements under the Provincial Insolvency Act for initiating insolvency proceedings, hastily proceeded to take the cases on file and therefore, the entire proceedings pending before the trial court may be directed to be quashed. ( 4. ) LEARNED counsel for the petitioner, at the foremost, submits that the contesting respondents, who are close relatives of the petitioner, have resorted to the insolvency proceedings only with a view to blackmail the petitioner and to lower his family esteem. According to him, in the absence of creditor-debtor relationship between the petitioning creditors/contesting respondents and the petitioner, the question of adjudicating the legal heirs of the alleged debtor-late N.K.Karuppiah Konar as insolvents will not arise at all. Also, there is no prima facie material available to substantiate the case of the creditors that N.K.Karuppiah Konar borrowed the amount in question from them. Mere claim of the petitioning creditors that failure on the part of the legal heirs in repaying the father's debt cannot be a ground at all for adjudging the petitioner as an insolvent, for the simple reason that none of the conditions prescribed in Section-9 of the Provincial Insolvency Act (hereinafter referred to as the 'Act') has been complied with. 4-A. Referring to Section 9(1)(b) of the Act, it is pointed out that the petitioning creditors shall not be entitled to present an Insolvency Petition against a debtor unless the debt is a liquidated sum payable either immediately or at some certain future time. 4-A. Referring to Section 9(1)(b) of the Act, it is pointed out that the petitioning creditors shall not be entitled to present an Insolvency Petition against a debtor unless the debt is a liquidated sum payable either immediately or at some certain future time. The provision in Section 9 (1)(c) to the effect that a creditor shall not be entitled to present an insolvency petition against a debtor unless the act of insolvency on which the petition is grounded has occurred within three months before the presentation of the petition, is highlighted to contend that, in the present case, even as per the pleadings of the petitioning creditors/contesting respondents, the original debtor-late N.K.Karuppiah Konar passed away in the year 2006 and the insolvency petitions came to be filed only in the month of February, 2008; thus, the specific condition as stipulated under Section 9(1)(c) of the Act that the petition should be presented within three months from the date of insolvency having not been complied with, the proceedings pending before the trial court are liable to be quashed as not sustainable in law. 4-B. LEARNED counsel also drew the attention of this Court to Section 25 of the Act, which provides that the Insolvency Court has the power to dismiss the insolvency petition, even if the petitioning creditor had satisfied all the requirements of the Act and that his petition is well founded, on certain stated circumstances and, one of the circumstances is if the insolvency court is satisfied with the debtor that he is able to pay his debts. To fortify the said position, learned counsel has relied on a judgment of the Apex Court reported in AIR 1996 SC 918 (Y.Malludora v. Seetharathnam) wherein it has been held that if the petition filed is found to be malicious or has been made for some collateral or inequitable purpose such as putting pressure upon the debtor or for extorting money or where the petitioning creditor having refused tender of money, fraudulently and maliciously files the application, the discretion to dismiss the petition can be exercised by courts. Further, if the amount lying in court deposit to the credit of the alleged debtor is much more than the money stated to be due to the petitioning creditor that would be sufficient for dismissing the Insolvency Petition under Section 25 of the Act. Further, if the amount lying in court deposit to the credit of the alleged debtor is much more than the money stated to be due to the petitioning creditor that would be sufficient for dismissing the Insolvency Petition under Section 25 of the Act. In this context, learned counsel would submit that the petitioner owns a residential property and cultivable land to an extent of 25.50 and 26.50 aers, as could be seen from the schedule of property annexed to the pleadings by none else than the contesting respondents themselves, and such fact would undo the case of the petitioning creditors that the petitioner has no means to re-pay the debt, assuming the debt is true and in such circumstances, the prayer of the petitioning creditors to declare the petitioner as insolvent does not merit consideration at all. 4-C. While referring to Section-6 of the Act for the proposition that even the mere delay in payment to creditors by the debtor may not per se continue an act of insolvency, it is further submitted that the properties of the deceased/alleged debtor stands without alienation, therefore, when sufficient immovable properties are available, the petitions maliciously targeting the petitioner and his brother and sister for being declared to be insolvents, are not maintainable in the eye of law. It is reiterated that the relationship of creditor-debtor not being existent between the contesting respondents and the petitioner and there being no material whatsoever in the form of pronote or loan receipt to substantiate that the alleged debtor-late N.K.Karuppiah Konar had in fact borrowed the debt amount during his life time, absolutely no cause of action is available to initiate the insolvency proceedings against the legal heirs of deceased Karuppiah Konar much less the petitioner herein, therefore, the trial court has committed a grave error in taking on file the aimless litigation launched with mala fide intention only to malign the petitioner and his family. ( 5. ( 5. ) THE only issue that arises for consideration in these Civil Revision Petition is whether the trial court is justified in taking on file the Insolvency Petitions filed by the petitioning creditors against the petitioner/legal heir of the alleged debtor in the light of the specific case of the petitioner that none of the conditions as stipulated in Section 9 of the Act have been complied with and when there is no piece of material available even to suggest that the original debtor ever borrowed any amount from the petitioning creditors. ( 6. ) IN order to examine the issue involved, it would be of much relevance to quote below Section 9 of the Act which pertains to the conditions on which a creditor may petition against a debtor:- 9. Conditions on which creditor may petition:--(1) A creditor shall not be entitled to present an insolvency petition against a debtor unless,-- (a) the debt owning by the debtor to the creditor, or, if two or more creditors join in the petition, the aggregate amount of debts owing to such creditors, amounts to five hundred rupees; and (b) the debt is liquidated sum payable either immediately or at some certain future time, and (c) the act of insolvency on which the petition is grounded has occurred within three months before the presentation of the petition. Provided that where the said period of three months referred to in Clause (c) expires on a day when the Court is closed, the insolvency petition may be presented on the day on which the Court re-opens. ( 7. ) NOW, let this Court contrast the issue with the aforesaid legal provision which stipulates three conditions, of which, the ones stipulated as (b) and (c) are relevant. Even with regard to the first condition specified as (a), curiously, there is no direct relationship of creditor and debtor exists between the contesting respondents herein and the petitioner/legal heir of the alleged original debtor. Further, when immovable properties of the deceased-debtor are admittedly available with the legal heirs, it is not known why the petitioning creditors aimlessly initiated the insolvency proceedings instead of proceeding against the estate of the deceased in a properly framed suit. Seemingly, there is no decree as such available against the petitioner nor their deceased father for enforcement. Further, when immovable properties of the deceased-debtor are admittedly available with the legal heirs, it is not known why the petitioning creditors aimlessly initiated the insolvency proceedings instead of proceeding against the estate of the deceased in a properly framed suit. Seemingly, there is no decree as such available against the petitioner nor their deceased father for enforcement. Therefore, prima facie, having regard to the condition prescribed in Sec.9(1)(a), the applications filed before the trial court under the provisions of the Act should be held to be totally without jurisdiction. ( 8. ) COMING to the condition specified in Sec.9(1)(b) of the Act to the effect that a creditor shall not be entitled to present an Insolvency Petition against a debtor unless the debt is a liquidated sum payable either immediately or at some certain future time, again, there is no proof available to show that late N.K.Karuppiah Konar had executed any pronote acknowledging receipt of alleged debts from the petitioning creditors and agreeing to repay the outstanding at a particular future date or point of time. Under such circumstances, the plea of the petitioner that, in the absence of any document executed by his deceased father towards borrowal of the alleged debt, the alleged transaction itself is imaginary, assumes significance. Therefore, when the petitioning creditors could not succeed in complying with the aforesaid condition in respect of time factor regarding repayment, there may not be any justification for the trial court to accept the case to proceed against the petitioner. ( 9. ) IN regard to the condition prescribed in Section 9(1)(c) of the Act providing that the act of insolvency on which the petition is grounded has occurred within three months before the presentation of the petition, it is seen that the alleged debtor is said to have borrowed Rs.5,000/-, Rs.10,000/- and Rs.5,000/- from the petitioning creditors on 12.11.2005, 18.07.2005 and 29.06.2006 and admittedly, he died in the year 2006; therefore, the act of insolvency which forms basis for filing of the insolvency petition should have occurred within three months before the presentation of the petition, whereas, the petitioning creditors have filed the Applications before the trial Court only during February, 2008. The proviso to the Section is also clear that where the said period of three months limitation expires on a day when the court is closed, the petition may be presented on the day on which the court reopens. Thus, the time factor as prescribed in the provision, taken either as a condition precedent or only a period of limitation, to file the petition is also not complied with by the petitioning creditors. IN the petition filed before the court below, the petitioning creditors categorically averred that the deceased-debtor died in the year 2006, however, the petition was filed in February, 2008; thereby, it is abundantly clear that the condition as stipulated in Sec.9(1)(c) has not been complied with. ( 10. ) CURIOUSLY, even though there is no direct relationship to the petitioner with the creditors as debtor, the creditors have not even whispered before the trial court against the petitioner, in that, he is endeavouring along with other family members to alienate the estate of the deceased to third parties, thereby, the acts of insolvency as articulated in Section-6 of the Act with the sub-title 'Acts of insolvency' are attracted. Furthermore, the petitioning creditors' relationship with the deceased as debtor is also not substantiated by any substantive material. If at all the creditors have any legally valid and enforceable claim against the deceased debtor on the strength of valid materials, at best, they have to proceed against the estate of the deceased, who left behind him immovable property and in the absence of any pleading by them to the effect that the petitioner and his family members are trying to interfere with the said property to deprive them of realising back the debt amount, I am of the considered opinion that the trial court is totally misled itself and erroneously proceeded to take the insolvency petitions on file. In alike cases, pertaining to exercise of power under Article 227 of the Constitution of India, the Apex Court, in its various decisions including Surya Dev Rai v. Ram Chander Rai (2003) 6 SCC 675 , while observing that though the Certiorari jurisdiction available under Article 227 is not to be exercised as a matter of course, yet, such power is wider than the one conferred on High Courts by Article 226 in the sense that the power of superintendence is not subject to those technicalities of procedure or traditional fetters which are to be found in certiorari jurisdiction, highlighted the legal position that the power may be exercised in cases occasioning grave injustice or failure of justice such as when (i) the court or tribunal has assumed a jurisdiction which it does not have, (ii) has failed to exercise a jurisdiction which it does have, such failure occasioning a failure of justice, and (iii) the jurisdiction though available is being exercised in a manner which tantamounts to overstepping the limits of jurisdiction. While assessing the case of the petitioner herein, in the light of the dicta laid down by the Apex Court, this Court is of the considered opinion that the trial Court has failed to consider the only core aspect that the insolvency petitions are not maintainable for the following reasons: (a) There is no direct relationship of debtor-creditor between the petitioner and the petitioning creditors and further, there is no substantive material even to suggest that the father of the petitioner ever borrowed the sum from the petitioning creditors; (b) None of the conditions as stipulated in Section-9 of the Insolvency Act and the ingredients embracing the acts of insolvency as provided in Section 6 have been complied with and attracted, giving rise to a cause of action for exercise of jurisdiction; (c) The petitioning creditors themselves have shown the petitioner as a 'man of means' by stating in the schedule annexed to the petitions that he owns a residential property with two floors and three lands, to an extent of 54 ares, in Srivilliputhur and further, not a even a whisper has been made anywhere in the insolvency petitions that the petitioner herein is attempting to alienate or sell those properties to any relative or third party; and (d) Admittedly, no decree has been obtained against the original debtor for enforcement. Inasmuch as grave injustice has occasioned by the act of the trial court in taking up the frivolous and vexatious litigations launched, absolutely warranting interference by this Court; to meet the ends of justice, the pointless proceedings initiated to malign and degrade the petitioner/legal heir of the alleged debtor are hereby quashed. ( 11. ) CIVIL Revision Petitions are ordered accordingly, quashing the insolvency proceedings initiated against the petitioner herein, one of the respondents in I.A. Nos.1 to 3 of 2008 on the file of the Principal District Munsif, Srivilliputhur. No costs. however, there will be no order as to costs. Connected Miscellaneous Petitions are closed.