S.A.Masud, J. - (1.) This is a creditor's application for an order of adjudication against the debtor, Bholanath Chatterjee. According to the creditor on or about 2nd September, 1966 he lent and advanced to the debtor for the purpose of the latter's business a sum of Rs. 3,000 repayable 90 days after the said date with interest thereon at the rate of 6 per cent per annum. In support of the debt a copy of the hundi was annexed to the petition. The act of insolvency is set out in paragraph 10 of the creditor's petition. The first act of insolvency according to the creditor is that Bholanath Chatterjee has sold out his business "Malay Grill" at premises No 82/2A. Bidhan Sarani Calcutta where he was carrying on business, and this transfer of the business is a transfer "with intent to defeat and delay his creditors" within the meaning of S. 9(b) of Presidency Towns Insolvency Act, 1909; second act of insolvency is that on 6th May 1967, 10th May 1967, and 11th May 1967 the creditor tried to see the debtor, but on each occasion the debtor was alleged to have avoided him and was absenting himself from his residence, thus, attracting Section 9(d)(ii) and (iii) of the said Act by depriving him of the means of communicating with him. The debtor in his affidavit has admitted the execution of the hundi, but has stated that the said money was taken in connection with a business proposition in respect of film production. He has set out his case in his affidavit by giving a long story that there was an arrangement between him and the creditor that he would finance the production of certain films. It is also stated that with the money secured from the creditor he would be able to get a loan of Rs. 5 lakhs from the Government of India for production of a film known as "Mastarda" The execution of the hundi has been admitted. By a letter dated 12th May 1967 Mr. S K. Guha, the solicitor of the creditor has written to the debtor at No 82/2A Bidhan Sarani, Calcutta-4, whereby the debtor was asked to pay the said sum of Rs. 3,000 in default of which a suit will be instituted against him. One Mr. S. N. Ghosh replied to the said letter of Mr. S. K. Guha on 23rd May 1967 where it is stated that an agreement took place in presence of one Dilip Mukherjee to the effect that the creditor would pay a sum of Rs. 25,000 towards the production of the said film, "Mastarda" and that the said Hundi was executed in that connection. The said Dilip Mukherjee has not sworn any affidavit in support of the debtor's case. I am satisfied that on the affidavits, prima facie, the debt has been established.
(2.) The next point to be decided is whether an application under the Insolvency Act is a proper procedure by which the creditor could get relief. Mr Gupta, learned counsel for the creditor has submitted that the debtor had transferred his only asset, namely his business in "Malay Grill" and this transfer was effected with the intention to defeat his creditors including his client. He has drawn ray attention to the following observation at page 109 in Mulla's "The Law of Insolvency in India". Second Edition: "A transfer by a debtor of all or substantially all his property in consideration of a past debt, that is, a debt already incurred, whether made absolutely or by way of a security is an act of insolvency within the meaning of this clause, whatever the motive of the parties may have been, as such transfer has the effect of withdrawing all the debtor's property from the legal process which his creditors have a right to enforce against him." According to him this is an act of insolvency and as such the creditor has the lawful right to make this application. It appears to me from paragraph 11 of the affidavit of Bholanath Chatterjee that the said business of "Malay Grill" was sold to repay the debtor's liability under a decree against him passed by this Hon'ble Court on the 9th August 1966 in Suit No. 2100 of 1965 (Om Finance Corporation v. Bholanath Chatterjee). This fact is not denied by the creditor in his affidavit-in-reply.
(3.) Mr. Sen Learned counsel for the debtor, has submitted that this transfer of the debtor's business by itself cannot be considered as an act of insolvency. Where a debtor has got a genuine debt and in satisfaction of this debt transfers his property, such transfer cannot be held as a transfer with intention to defeat the claim of the other creditors. He relied upon Muthiah Chetti v. Palaniappa Chetti, AIR 1928 PC 139 and also Arvi Co-operative Credit Society v. Dhondiram Navalchand, AIR 1940 Bom 289 in support of his contention.;