1981 (3) TMI 271 - HC - Indian Laws

Summary

Issues Involved:
1. Legality of the order of adjudication against the appellants under Section 9(g) of the Presidency Towns Insolvency Act.
2. Validity of the letters (Exs. P. 5 and P. 6) as evidence of the act of insolvency.
3. Whether the amounts claimed by respondents were immediately payable.
4. Scope of the suspension of payments: whether it applied to all creditors or only a specific class.
5. Binding nature of the fourth appellant's actions on other partners.

Detailed Analysis:

1. Legality of the Order of Adjudication:
The appellants challenged the order of adjudication passed against them in the insolvency petition, arguing that they had not committed an act of insolvency under Section 9(g) of the Presidency Towns Insolvency Act. The court examined whether the appellants' actions constituted an act of insolvency, particularly focusing on the letters Exs. P. 5 and P. 6, which indicated a suspension of payments to creditors.

2. Validity of the Letters (Exs. P. 5 and P. 6):
The appellants contended that the letters were not written voluntarily by the fourth appellant but were coerced by Motiram, an agent of the Multani Bankers. The court found this contention unconvincing, noting that the fourth appellant was managing the firm's affairs and had previously written similar letters to other creditors. The court concluded that the letters were written voluntarily and indicated a genuine suspension of payments due to financial difficulties.

3. Immediate Payability of the Amounts Claimed:
The appellants argued that the amounts claimed by respondents 1 to 3 were not immediately payable and that they had until July 1976 to make the payments. The court found that this contention was not raised before the learned single Judge and that the appellants had acknowledged the amounts were due in June 1976. Therefore, the court rejected the argument that the amounts were not immediately payable.

4. Scope of the Suspension of Payments:
The appellants argued that the suspension of payments mentioned in the letters referred only to the Multani Bankers and not to all creditors. The court found this argument untenable, citing the fourth appellant's admission that the suspension of payments applied to all creditors. The court held that the suspension of payments was general and satisfied the requirements of Section 9(g) of the Act.

5. Binding Nature of the Fourth Appellant's Actions:
The appellants contended that the letters written by the fourth appellant should not bind the other partners, as there was no evidence of their consent. The court examined the legal principles regarding the binding nature of a partner's actions on the firm. It concluded that the fourth appellant's actions were binding on all partners, as he was managing the firm's affairs, and the letters were written on behalf of the firm. The court noted that the third appellant had participated in preparing the letters, and the second and fifth appellants had left the management to the fourth appellant. Therefore, the court held that the suspension of payments indicated in the letters was an expression made by all partners.

Conclusion:
The court dismissed the appeal, holding that the appellants had committed an act of insolvency under Section 9(g) of the Presidency Towns Insolvency Act. The court found that the letters Exs. P. 5 and P. 6 were valid evidence of the suspension of payments and that the actions of the fourth appellant were binding on all partners. The appeal was dismissed without any order as to costs.