(FIRM) BAIJNATH RAMESHWAR LAL Vs. ATAL PRASAD KUMAR AND ORS

JUDGEMENT

(1.) This is an appeal against an order of the District Judge of Bhagalpur dismissing an insolvency petition of the appellant, one of the creditors of the respondents who are ten in number and are members of the same family. The learned District Judge has refused to pass the order of adjudication. The ground on which the petition was pressed before the learned District Judge was that the respondents have made some transfer of their properties for inadequate consideration with a view to defeat or delay the creditors. The respondents objected to their being adjudged insolvents, denied the allegation of the petitioner and contended that they were not members of a joint family but were separate. The learned District Judge examined the transactions relied on by the petitioner, and has held that they were bona fide transfers for sufficient consideration. The petitioner has preferred this appeal. In my opinion the proceeding in the lower Court was not conducted according to the provisions of law which govern this case. Neither of the parties, nor unfortunately the learned District Judge, realised the correct position. Section 7, Provincial Insolvency Act, authorizes either the debtor or any of his creditors under some restrictions to apply for an order of adjudication. Section 9 places (restrictions upon the creditor when he applies for such an order. They are three:

(2.) Acts of insolvency are described in Section 6 of the Act. Clauses (b) and (c) of that section, which are relevant for the purposes of the present appeal, are these:

(3.) It will be noticed that these two subsections refer to any transfer. The question of inadequacy or otherwise of the consideration is not an element of the transfer which constitutes an act of insolvency. It seems that perhaps the parties and the learned District Judge had in their minds Section 53, Insolvency Act, which makes certain transfers made within two years of the presentation of the petition for adjudication voidable as against the receiver and liable to be annulled by the Court. In that case inadequacy of consideration or the bona fide nature of the transaction are matters which have to be gone into; but for the purpose of adjudication whether the case comes under Clause (b) or Clause (c) it is not necessary that the transfers should be for inadequate consideration. If a man who is heavily in debt begins to dispose of his properties with intent to defeat or delay his creditors, or being unable to pay his debts, transfers them to one or more of his creditors with a view to give him or them fraudulent preference, he commits acts of insolvency, though he may have transferred the properties for a very adequate consideration or for consideration much higher than the value of the properties. In order to find out what preference is liable to be held fraudulent if the debtor is adjudged insolvent, one has to examine the provisions of Section 54, Provincial Insolvency Act, which runs thus: