K. Chandru, J.@mdashHeard the petitioner. This Petition has been filed by the petitioning Creditor under Sections 9(1)(b), 9(1)(d)(ii), 10, 11, 12 and 13 of the Presidency Towns Insolvency Act, 1909 (for short PTI Act), praying to adjudicate the Debtor as insolvent.
2. The Petitioning Creditor sold to the debtor one number of 6 colour Flexo Printing machine with cylinders, for which the debtor did not make payment. Hence the petitioning creditor issued notice to the debtor. The respondent sent a reply sating that she will pay the amount if the interest is waived. The petitioning creditor agreed for the same, but the debtor did not make payment.
3. Therefore, the petitioning Creditor has filed this Insolvency Petition under Sections 9(1)(b) and 9(1)(d)(ii) of the PTI Act alleging that the respondent/debtor did not make payment and hence she committed the act of insolvency. Sections 9(b) and 9(d)(ii) reads as follows:
9. Acts of insolvency.-- (1) A debtor commits an act of insolvency in each of the following cases, namely:--
(b) if, in the States or elsewhere, he makes a transfer of his property or of any part thereof with intent to defeat or delay his creditors;
(d)(ii) he departs from his dwelling-house or usual place of business or otherwise absents himself.
4. When the matter was taken up for enquiry, since the respondent was absent, she was set ex parte. The matter was directed to be posted before the Master for recording evidence. The petitioning Creditor has filed proof affidavit, dated 02.07.2009 and marked four documents as Exs. P. 1 to P. 4. Ex. P. 1 is the invoice for Rs. 17,49,300/- for supplying the machinery. Ex. P. 2 is the notice to the respondent. Ex. P. 3 is the reply from the respondent and Ex. P. 4 is the notice on the Insolvency Petition.
5. In order to attract the provisions of Sections 9(1)(b) and 9(1)(d)(ii) of the PTI Act, the following averments have been made in the proof affidavit:
3. ... She was never available at her residence as well as in the factory premises whenever I tried to contact her personally, the debtor departed from her dwelling house or otherwise absented herself. ... On subsequent days also I tried to contact her but she departed her dwelling house or otherwise absent....
4. The respondent with mala fide intention to defeat me and others absented herself from the dwelling house or usual place of business otherwise absented herself.
6. This Court in its judgment in
10. ... If the transfer is made for the purpose of enabling the debtor to continue the business, it would not constitute an act of insolvency, even though the whole of the debtor''s property is alienated. But, if the transfer is just a cloak to defeat the other creditors, it would constitute an act of bankruptcy. In dealing with this question, the Court of Appeal in Ex parte Johnson In re Chapman, (1884) 26 Ch D 338 observed that the true test is, was the fresh advance made by the lender with the intention of enabling the borrower to continue his business and had he reasonable grounds for believing that the advance would enable the borrower to do so? If these questions can be answered in the affirmative, the execution of the deed, even if it comprises of the whole of the debtor''s property, would not be an act of insolvency. The validity of a mortgage by a trading partnership of all its assets arose for consideration before the Privy Council in
7. Further, the Supreme Court vide its judgment in
7. ... The Section expressly mentions three circumstances in which the Petition made by a creditor must be dismissed namely, (i) the absence of the right of the creditor to make the application; (ii) failure to serve the debtor with the notice of the admission of the petition; and (iii) the ability of the debtor to pay his debts. In addition, the Court has been given a discretion to dismiss the Petition if it is satisfied that there is other sufficient cause for not making the order against the debtor. The last clause of the section need not necessarily be read ejusdem generis with the previous ones but even so there can be no sufficient cause if, after an act of insolvency is established, the debtor is unable to pay his debts. The discretion to dismiss the Petition can only be exercised under very different circumstances. What those cases would be, it is neither easy nor necessary to specify, but examples of sufficient cause are to be found when the Petition is malicious and has been made for some collateral or inequitable purpose such as putting pressure upon the debtor or for extorting money from him, or where the petitioning creditor having refused tender of money, fraudulently and maliciously files the Application. ...
8. This Court, following the said judgment of the Supreme Court, in
25. ... It is clear that the Petition filed by the petitioning creditor can be dismissed even for reasons that are not mentioned u/s 9(5) of the PTI Act.
Further, while reiterating the strictness with which such Application should be dealt with, is also set out in paragraph 27, which reads as follows:
27. To sum up, as stated earlier, the Insolvency proceedings have to be construed with greatest strictness in favour of the debtor. The Courts have emphasised the need for such strict view. Hallsbury''s Laws of England relating to bankruptcy in para 255 it is precisely observed that "the words of the enactment creating act of insolvency are construed and applied in their strict technical sense." The said view is reiterated by various High Courts as well as the Hon''ble Supreme Court. The term "petitioning creditor" has to be construed with strictness....
9. In the light of the above precedents on the legal provisions, one has to see whether the petitioner has made out any case in order to attract Section 9(1)(b) of the PTI Act. The petitioner ought to prove that the debtor had made transfer of his property or any part thereof with intent to defeat or delay his creditors. There is no iota of evidence for coming to such a conclusion even in the absence of the respondent/debtor.
10. With reference to the invocation of Section 9(1)(d)(ii) that the respondent has departed from his dwelling house or usual place of business or otherwise absented himself, again except for the petitioning creditor to state that whenever he visited, the respondent was not present, there is no ground to invoke the said provision. On the contrary, Exs. P. 3 and P. 4 were received by the respondent in her house though she is carrying on business in a place outside the jurisdiction of this Court.
11. It is not a case where the petitioning Creditor has got a decree so as to prima facie accept that the decree was not satisfied. In case of a decree holder, Section 9(2) of the PTI Act is available. But, in order to bring it within the act of insolvency with various subsections to Section 9(1), the petitioning creditor will have to make out a strong case. Neither in the oral evidence nor documents produced, there is anything found to infer that Section 9(1)(d)(ii) of the PTI Act is attracted to the case on hand. In the light of the same, this Insolvency Petition stands dismissed. However, there will be no order as to cost.
