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Judgment
S.T. Ramalingam, J.—The 1st and 2nd petitioning Creditors are husband and wife respectively. They filed this petition under Sections 9(g),
10, 11, 12 and 13 of the Presidency Towns Insolvency Act against the eight respondents for adjudging them as insolvents and for directing their
properties to vest with the Official assignee, Madras, under the following circumstances.
The 1st respondent is a firm of partnership, of which respondents 2 to 8 are partners. The 1st respondent is a Financing Firm and it used to
receive deposits from the public. In the usual course of its business, the petitioning creditors deposited Rs. 50,000/- as Term Deposit on 15-11-
1983. The maturity date for the deposit was 18-11-1986. The deposit carried interest at 13 per cent per annum. Interest was payable every
month.
The respondents paid interest up to 31-8-1985 and failed to pay interest thereafter. Hence a letter was written by the petitioning creditors stating
that there is a breach of contract In their reply to the said letter, the respondents requested to deposit the entire money with their sister concern
Messrs. C.J. Sheth Construction Company, for which course of action, the petitioning creditors did not agree. However, the petitioning creditors
requested the respondents to pay the interest forthwith. On 10-3-1986 the 1st respondent sent a communication stating that from March, 1986
onwards part repayment against the Term Deposit will be made and interest will be paid after full deposit amount is repaid. The petitioning-
creditors did not agree for such a course and demanded payment in lumpsum. On maturity of the Deposit, they demanded payment of the deposit
in lumpsum with accumulated interest After the date of maturity, the 1st petitioning-creditor (P.W. 1) went to the 1st respondent-firm and met the
5th respondent Mukesh K. Seth. When the 1st petitioning-creditor demanded payment, he received an answer that the respondents would pay
35% of the amounts due as full and final settlement, for which course the 1st petitioning-creditor did not agree. Thereafter another proposal was
made that the respondents will pay the amount due to the petitioning-creditors at the rate of Rs. 1300/- per month for which course of action also,
the petitioning-creditors did not agree. Then there was a discussion between the 1st petitioning- creditor and the 5th respondent In the course of
that discussion, the 5th respondent conveyed that he has suspended payment On that ground, this petition has been filed.
A common counter has been filed on behalf of the respondents. Their case is one of denial of the allegations made by the petitioning-creditors.
According to the respondents, they wrote a letter on 10-3-1986 and offered a practical solution by which the liability of the 1st respondent could
be wiped out in easy instalments in view of the unforeseen liquidity problems faced by them. The further case of the respondents is that since the
petitioning-creditors urged for repayment before maturity, the respondents, in order to convince the petitioning-creditors, promised to pay Rs.
1300/- every month from the 2nd week of August, 1986. Since the petitioning-creditors returned back all the drafts and cheques, the 1st
respondent wrote back to the petitioning-creditors by their letter dated 12-1-1986 that they were cancelling all cheques and drafts amounting to
Rs. 5,000/-. In the said letter, the 1st respondent has also acknowledged the entire liability towards the principal and interest due and has admitted
the delay that had occurred due to unforeseen circumstances. The respondents denied the meeting of P.W. 1 with the 5th respondent, as also the
alleged suspension of payment made by the 1st respondent. According to the respondents, neither the 5th respondent nor any other respondents
pressurised the 1st petitioning-creditor (P.W. 1) to accept 35% of the principal amount in full and final settlement of the amounts due to the
petitioning-creditors. The 1st respondent, by its letters dated 26-11-1986 and 3-12-1986, had conveyed their offer for repaying the amount due
to them in instalments, since repayment of the full amount was not possible in view of the unforeseen circumstances faced by the 1st respondent.
There was no deliberate intention on the part of the respondents to defraud, defeat or delay any one of the creditors as alleged in paragraph 10 of
the petition. The respondents have not committed any act of insolvency, and the requirements of Sections 9 and 9(g) of the Presidency Town
Insolvency Act have not been satisfied. As such, the petition is liable to be dismissed.
On behalf of the petitioning-creditors the 1st petitioning-creditor gave evidence and marked. Exs. P. and P. 2. On behalf of the respondents,
one of the eight partners of the firm by name Manoj K. Seth, who has not been made a party to this Insolvency Petition, has been examined and
Exs. Rule 1 to Rule 6 have been marked.
The question that arises for consideration in this petition is whether the respondents have committed an act of insolvency as contemplated u/s
9(g) of the Act
The debt is admitted and it is an ascertained amount. The only question that arises for consideration is whether the representations alleged to
have been made by the 5th respondent on behalf of the firm to P.W. 1 on 18-11-1986 that he has suspended payment is true or not The fact that
P.W. 1 attended the office of the respondents on 18-11-1986 is not in dispute. Ex. Rule 1 is a letter sent by P.W. 1 to the 1st respondent-firm in
which P. W. 1 has specifically mentioned about the meeting that has taken place between P.W. 1 and the 5th respondent Mukesh K. Seth. He
also mentions that Mukesh K. Seth offered 35% of Rs. 62,425/- which approximately came to Rs. 22,000/- for full settlement, or in the
alternative, to pay the entire amount in instalments of Rs. 1,300/- per month without any interest on the amount remaining with the 1st respondent-
firm and later, the withdrawal of the proposal by the 5th respondent Ex. Rule 1 mentions the counter-proposal made by P.W. 1 viz., 50% payment
of the total amount due in one instalment and the rest of the payment in equal instalments to be mutually agreed. Ex. Rule 1 also contains that for
such a course, the 5th respondent did not agree. Thereafter, the counter-proposal made by P.W. 1 was also withdrawn. P.W. 1 also rejected the
various proposals made by the 5th respondent. In Ex. Rule 1, P.W. 1 has given an ultimatum up to 20-11-1986, 5 p.m. and demanded the entire
payment, for which the 1st respondent-firm had replied under the original of Ex. P. 2 accepting the arrival of P.W. 1 in their office of the 1st
respondent but denying that the 5th respondent Mukesh K. Seth was present on 18-11-1986 discussions. But they have not elected to state the
name of the partner, who was present on 18-11-1986. According to R. W. 1, on 18-11-1986, Mukesh K. Seth (5th respondent) was not present
since he was permanently residing at Bangalore, but he (R. W. 1) was present when P.W. 1 had discussion in the office of the 1st respondent.
According to him, the rest of the partners excepting the 5th respondent did not offer 35% payment in full and final settlement nor R. W. 1 informed
P.W. 1 that he has suspended payment. R. W. 1 also accepted the receipt of Ex. R. 1 letter and the reply under the original of-Ex. R. 2. In Ex. R.
2, they have not specifically denied the various proposals made by the 5th respondent and also the counter-proposal made by P.W. 1. It only
mentions that P. W. 1 came to the office of the 1st respondent and had discussions and that the 1st respondent-firm had exchanged their difficulties
and views. They further stated in Ex. R. 2 ''that Mr. Mukesh K. Seth (5th respondent) was not present on 18-11-1986. However, in Ex. R. 3, the
respondents have conveyed their intention to pay in monthly instalments. Even according to R. W. 1, there were 900 depositors. Further according
to R. W. 1, the firm has received about 51/2 crores to 6 crores of rupees by way of deposits and the amount due to the various creditors is only
Rs. 55,00,000/- as on 26-9-1988. His evidence about the discharge of the deposits to an extent of rupees five crores has not been proved by
documentary evidence. R. W. 1 also admitted that they have been postponing payments from 1986 to 1990 and issuing postdated cheques of the
year 1990. How many cheques he has issued for the year 1990, he is not able to say. To a question put to him that the cheques dishonoured
would be more than one hundred in number, he was not in a position to deny it R. W. 1 has stated that the 1st respondent firm has discharged 500
creditors between the last insolvency petition and the present petition. But he has not produced any letters from any one of the depositors-at least
from one of the debtors to prove that he had been paid in full and final settlement. The bank statement furnished by R. W. 1 did not correlate the
payments and the depositors, as also the amount due to those depositors and the amount paid to those depositors. R. W. 1 has also not produced
the cancelled Term-Deposit Receipts, which the firm has discharged. As far as the meeting between P.W. 1 and one Mukesh is concerned, the
case of R. W. 1 is that P.W. 1 came on 18-11-1986 and he was the only partner, who was present for the discussion with P.W. 1.
It may be remembered ""that R. W. 1 gave evidence in I.P. 24 of 1986 also. The overall picture of the answers given by R. W. 1 creates an
impression in my mind that he is not speaking the truth. In my judgment in I.P. 24 of 1986 In the matter of Messrs. Sugesan Finance Investment
reported in 1988 2 LW 125, I have stated that issuing post-dated cheques for the years 1988 and 1989 to all the depositors would produce an
impression in the minds of the creditors that the debtors are going to suspend payment of their debts. Such is the position here established. Issuing
post-dated cheques for the year 1990 to the creditors of R. W. 1 firm will amount to suspension of payment. There is no guarantee that those
cheques will be honoured in the year 1990 and that this firm will continue to exist till then. Hence I am satisfied that the respondents have
committed an ''act of insolvency'', and they are liable to be adjudged as insolvents.
In the result, the Insolvency Petition is allowed as prayed for. No costs. This order will take effect on 11-1-1989.