Decided on July 17,1963



- (1.) This revision petition arises out of an application filed by the respondent-creditor, K. Rayulu, under Section 9 of the Provincial Insolvency Act, hereinafter called the Act, for adjudicating as insolvents the 2nd respondent herein which is a firm and the petitioner and respondents 3 and 4, who are the partners of the above-said firm. The central facts are as follows:- It was alleged in the petition that the petitioner and respondents 3 and 4 are the partners of the firm which is the 2nd respondent here. The partners acting on De-half of the firm borrowed for the respondent-firm Rs. 13,000.00 on 6-1-1951 and executed a promissory note which was subsequently renewed on 2-1-1954 for Rs. 16,962-9-0. They also borrowed a further sum of Rs. 5,500 on 4-1-54 for which another promissory note was executed in favour of the respondent. The partners did not pay that amount. Several individual acts of insolvency were alleged against the partners and a joint act of insolvency against all the partners in reference to a lorry belonging to the firm. On the basis of these acts of insolvency the respondent prayed that the firm as well as the three partners should be adjudicated insolvents. This petition was resisted by the petitioner and the 3rd respondent. Respondent No. 4 remained ex parte. The substance of their defence is that they did not commit any act of insolvency within the meaning of the Act. They admitted the allegations made in the petition but stated that they never effected transfers with an intent to defraud or delay the payment of the debt due to the respondent. Their contention was that the transfers were made in bona fide discharge of the antecedent debts.
(2.) On these pleadings and after recording the evidence adduced by the parties the Additional Subordinate Judge, Kakinada, allowed the petition and adjudicated all the three partners and the firm Insolvent. The learned Subordinate Judge held that the petitioner has succeeded in proving not only the individual acts of insolvency but also the collective act attributed to all the partners in reference to the sale of a lorry belonging to the firm. It was found that these transfers were made with an intent to defraud the creditor-petitioner. Dissatisfied with that order the petitioner went in appeal before the District Judge, Rajahmundry, The 3rd respondent also filed a Memorandum of Cross-objections. The appeal as well as the Memorandum of Cross-objections were heard together. The learned District Judge dismissed the appeal as well as the memorandum of cross-objections concurring with the conclusions of the Subordinate Judge mentioned above. It is this view of the District Judge which is assailed before me in this revision petition.
(3.) Mr. K. Krishnamurthy, the learned Advocate far the petitioner contends that the firm cannot be adjudicated insolvent and in any case not for the alleged acts of the partners. His submission is that those acts were not enough to adjudicate the firm as insolvent. In support of this contention he relied upon a passage occurring at page 96 of the Law of Insolvency in India by D. F. Mulla, and a decision of the Madras High Court in Gopal Naidu v. Mohanlal Kanyalal, 49 Mad LJ 709 : (AIR 1926 Mad 206). The passage relied upon from Mulla is as follows:- "There is no provision in the Provincial Insolvency Act, corresponding to Section 11(d) and Section 99 of the Presidency Towns Insolvency Act ..... It is not clear whether the provision for making rules in Section 79(2) (c) of the Provincial Insolvency Act lets in By implication, in cases under the Provincial Insolvency Act, the provisions of law relating to the adjudication of partners and of firms under the Presidency-towns Insolvency Act. In any case it is desirable to reproduce those provisions in the Provincial Insolvency Act." It is true that there is no specific provision in the Act corresponding to Section 11(d) and Section 99 of the Presidency Towns Insolvency Act. Section 79 (2) (c) of the Act however provides for rules being made by the High Court as to the procedure to be followed where the debtor is a firm. In pursuance of the power vested as above Rule 28 appears to have been framed which is as follows:- "28.(1) When any petition, notice or other document is signed by a firm of creditors or debtors in the firms name, the partner signing for the firm shall and also his own signature in the following manner, "B and Co., by A. B., a partner in the said firm." 2. Any petition or notice of which personal service is necessary shall be deemed to be duly served on all members of the firm, if it is served at the place of business of the firm in India upon any one of the partners or upon any parson having at the time of service the control or management of the Partnership business there. 3. When a firm of debtors files an insolvency petition, the same shall contain the names in full of the individual partners, and, unless it is signed by all of them, it shall be accompanied by the affidavit of the partner signing it that all the partners concur in the filing of the same.;

Click here to view full judgement.
Copyright © Regent Computronics Pvt.Ltd.