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TMI Blog1967 (10) TMI 71X X X X Extracts X X X X X X X X Extracts X X X X ..... id inspite of repeated demands. The petitioning-creditor has further alleged that the debtors: have committed two-three acts of insolvency viz. (1) the debtors have with intent to defeat and delay their creditors transferred their property or substantial part thereof viz. the business carried on by them in partnership in the firm name and style of Bhimji Nanji Co. together with the stock-in-trade, furniture, fixtures, fittings and outstandings thereof as a going concern together with the goodwill thereof and the tenancy rights of the said shop to Chhotalal Gulabchand Damani and Nanji Mavji Patel and that the said transfer amounted to fraudulent preference, (2) that the debtors had departed from the usual place of business or from their dwelling house and have otherwise absented themselves and (3) that the debtors have secluded themselves so as to deprive their creditors of the means of communication with them and have thereby impliedly given notice to their creditors of suspension of payment of their debts. On these allegations the petitioning-creditor has prayed for an order of adjudication against the debtors. 2. Apart from challenging the allegations pertaining to the sever ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... presentation of the petition? 5. Mr. Shah on behalf of the petitioning-creditor relied upon Section 12 of the Presidency-towns Insolvency Act, 1909, which prescribed the conditions on satisfying which a creditor was entitled to present an insolvency petition against a debtor. He pointed out that three conditions were laid down: (1) that there must be a debt owing by the debtor to the creditor amounting to ₹ 500 or upwards, (2) that the debt must be a liquidated sum payable either immediately or at some future time and (3) the act of insolvency on which the petition was grounded must have occurred within 3 months before the presentation of the petition. Mr. Shah pointed out that at the date when the petition was presented viz. on August 10, 1963, there was a debt much in excess of Ks. 500 owing by the debtors to the creditor and that the debt was obviously a liquidated sum which was payable at a certain date as per the Khata writing and that the debtors had committed the several acts of insolvency mentioned in the petition and he urged that since all these conditions had been satisfied the petitioning-creditor was entitled to present this petition and the Court had the pow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such order involving serious consequences is passed by the Court it is but proper that the Court should require all the proof of the debtor's indebtedness right upto the time the adjudication order is made. He, therefore, urged that not only should the debt, on the basis of which the creditor seeks an adjudication order, be subsisting at the date of the hearing, but it should also subsist till the adjudication order is passed by the Court. In support of his contention he relied upon a judgment of the Calcutta High Court in the case of Ahmad Mahomed v. Praphulla Nath MANU/WB/0006/1989 : (1988)1CALLT204(HC) where relying upon the two previous English judgments in Ex Parte Hammond; In re Hammond and Nevard (1873) 16 L.R.. 614 and in In re Stables, Ex Parte Smith Sons (1894) 1 Man 68, the Calcutta High Court has taken the view that the debt must exist not only at the time when the petition is presented but at the time of the hearing of the petition and at the time of making of the order of adjudication. The relevant observations appear at page 36 of the report and run as follows: ...The law is that there must be a debt of ₹ 500 or upwards existing not only at the time wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g of the petition. The ruling in Byramji Talati v. Official Assignee, Bombay is applicable only to a case where after the passing of an adjudication order proceedings for administration and distribution of the insolvent's property are pending, and in such proceedings the question arises whether a creditor can prove his debt which had become barred at the date of the adjudication order but had not become barred when the act of insolvency had been committed and the decision says, he would be entitled to prove such debt in those proceedings. That decision is no authority for the proposition that the debt need not be a subsisting debt at the time of the hearing of the creditor's petition for an adjudication order. 8. The Madras High Court decision relied upon by Mr. Shah undoubtedly supports his contention; however, it may be pointed out that that was a case under the Provincial Insolvency Act and relying upon the provisions of Section 9 of the Provincial Insolvency Act the Madras High Court took the view that once a creditor had fulfilled three conditions set out in Section 9 at the time when he filed the insolvency petition, there was no question of further fact being prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... son insolvent even if at the hearing the Court is apprised of the fact that the debt has already become time-barred or that the debt has in the meantime got reduced to less than ₹ 500-as for instance when the petition is presented on the basis of a decretal debt of say ₹ 1,000 and by the time the petition comes up for hearing the decree is reduced by the Court of Appeal to less than ₹ 500. I am inclined to take the view that the debt on the basis of which a petition has been presented by the creditor must be subsisting not only at the date of the presentation of the petition but also at the date of the hearing as well as at the date when the adjudication Order is proposed to be passed, and I am fortified in my view by the decision of the Calcutta High Court referred to above. 9. Mr. Shah urged that if this view were accepted by the Court it would cause great hardship to the creditor. Once an insolvency petition is presented by a creditor, he normally expects that the adjudication order would be passed at the hearing of his petition and simply because the hearing of the petition is delayed not for any default on his part but say on account of the exigencies of t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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