Chanahalu Siva Reddi and Another vs The Official Receiver of Bellary and Others

Burn, J.—The appellants are two out of three brothers who have been adjudicated insolvents in I.P. No. 43 of 1931, on the file of the

District Judge, Bellary. The learned District Judge has found that all the three brothers were in partnership and that the firm of which they were

members was liable to be adjudicated insolvent. The eldest brother who has not appealed put up a case that the business in which the debts due to

the petitioning creditors were contracted belonged to him alone and that his two younger brothers (the present appellants) had nothing to do with it.

The appellants also supported that case. They pleaded that they had effected a partition from their elder brother 4 or5 years before the insolvency

petition was filed. The eldest brother Ayyanha Gowd was adjudicated on his own admission and the appellants were adjudicated subsequently by

the District Judge.

It is contended on behalf of the appellants that there was no sufficient evidence to prove any partnership between these three brothers and

further that even if the partnership were found to have been proved, the acts of the insolvency alleged were committed only by the eldest brother

Ayyanna Gowd and that they could not suffice to support the adjudication in insolvency of the other two brothers. With regard to the question of

partnership, we have no hesitation in upholding the finding of the learned District Judge. The documents (Exs. D and D-1) and the account books

(Exs. G and H-O) are quite sufficient by themselves to show that the three brothers were jointly engaged in the trade. They are members of a joint

family and they state in Exs. D and D-1 that the trade which was being carried on under the name of the eldest brother Ayyanna Gowd was a

trade which was being conducted for the benefit of the joint family (vide Ex. D). In Ex. D-1 they said:

We are trading in partnership under the name of Ayyanna Gowd.

The only difficulty is whether the act or acts of insolvency committed by the first counter-petitioner only (the eldest brother) can support the

adjudication of the other two brothers. We have been referred to a number of cases. The learned District Judge has held that the eldest brother

Ayyanna Gowd secluded himself and evaded his creditors and also gave notice to his creditors that he had suspended payment. He has also held

that these acts of Ayyanna Gowd must be considered as the acts of the other members of the firm, viz., the two present appellants. In other words

the first counter-petitioner according to the learned Judge acted as the agent of the other two brothers who are in partnership with him. Under the

explanation to Section 6 of the Provincial Insolvency Act which defines an act of insolvency, it is laid down that for the purposes of this section the

act of an agent may be the act of the principal. The law is summarised in paragraph 136, page 103 of Muila''s Treatise on Insolvency in the

following words:

It will be seen from what is stated above that there is a distinction between an ordinary agent and an agent who has exclusive control of the

business and occupies such a position that the principal must stand or fall by his acts. In the former case the act of insolvency committed by the

agent is not the act of the principal. In the latter case the act of insolvency committed by the agent will be the act of principal.

In so far as the question of seclusion is concerned, we are of opinion that the seclusion of himself by Ayyanna Gowd was not an act which could

be attributed to his brothers. As regards suspension of payment it was clearly proved that he gave notice to the petitioning creditors that he was

unable to pay their debts. His own words are quoted by one witness as follows:

I cannot pay your debts : you can do what you like.

This is in our opinion as emphatic a notice as he could give that he was not going to pay his debts. If this notice was given by Ayyanna Gowd as

agent of his brothers it could only support their adjudication as insolvents if Ayyanna Gowd were found to be in sole charge or exclusive control of

the joint business. This we are satisfied is the truth from the evidence that has been recorded in this case. As we have already noticed, it was the

case of the Ayyanna Gowd himself and also of both the appellants that Ayyanna Gowd was the only person who had anything whatever to do with

the business. It is quite true that the petitioning creditors let in some oral evidence to the effect that these appellants had been seen sitting in the

shop and actually engaged in business. And Mr. Narasimhachariar who appears for the appellants would like us to accept this as showing that

Ayyanna Gowd was not in sole or exclusive control and to reject the statements of his own clients and the statement of Ayyanna Gowd himself on

this point. It is not shown that the appellants have incurred any debt on behalf of the partnership or ever put their names to any document executed

on behalf of the partnership. We think the case of the appellants and of Ayyanna Gowd with regard to the management of the business is true. It

seems clear that Ayyanna Gowd alone conducted this business and that he was in exclusive control of everything that was done in pursuance of the

objects of the partnership. On that finding Ayyanna Gowd''s notice of suspension of payment is one by which his partners (the appellants) must

also stand of fall in the words of their Lordships of the Privy Council in Kastur Chand Rai Bahadur v. Dhanpat Singh Bahadur (1895) 5 M.L.J.

269 : L.R. 22 IndAp 162 : ILR 23 Cal. 26 . For these reasons we hold that the acts of insolvency committed by Ayyanna Gowd must be deemed

to be the acts of the appellants also and that their adjudication as insolvents is correct. This appeal is accordingly dismissed with costs of the

Official Receiver and the opposing creditors (two sets) to be paid out of the estate.