Sivan Pillay vs Ramesh Chandra and Others

K. Padmanabhan Nair, J.—The petitioner in I. A. 5922 of 1993 in I. P. 2 of 1989 of the Principal sub Court, North Paravur is the revision petitioner. This Civil Revision Petition is filed against an order passed by the learned Sub Judge dismissing an application filed by the petitioner u/s 42 of the Insolvency Act to discharge him from the liabilities.

The short facts necessary for the disposal of the Civil Revision Petition are as follows : Proceedings under the Insolvency Act was initiated against the revision petitioner. On 18-6-1993 an order of adjudication was passed declaring the revision petitioner as an insolvent. Thereafter, the petitioner filed I. A. 5922 of 1993 to discharge him as provided u/s 42 of the insolvency Act. In the petition the petitioner had narrated the debts due to the respondents. It was further averred that after the order of adjudication, the petitioner has not acquired any property and not doing any business or getting any income. Hence, he prayed that he may be discharged of the liability to pay the debts described in the application. The prayer was opposed by the contesting respondents. The first respondent has filed an objection contending that the petition is not maintainable. It was specifically contended that the revision petitioner has previously made an arrangement in collusion with certain creditors who had been unduly preferred. It was further contended that the revision petitioner has omitted to keep a proper account of his financial affairs and he failed to account satisfactorily for any loss of assets. It was also contended that the petitioner had transferred his immovable properties to certain persons so as to defeat the creditors. The 4th respondent, the State Bank of Travancore, had filed an objection contending that the petition is not maintainable. It was contended that the revision petitioner was running a hotel and restaurant by name "Sivasakthi" at Alwaye and he was getting fabulous income from that business. It was also contended that the petitioner has sold the business to a close relative for an amount of Rupees Two Lakhs; but still the petitioner is conducting the business. The petitioner gave evidence as P. W. 1, After considering the pleadings and evidence, the learned Sub Judge found that the petitioner is not entitled to get an absolute order of discharge and dismissed that application. That order is under challenge in this Civil Revision Petition.

The learned counsel appearing for the revision petitioner has argued that the view taken by the learned Sub Judge is perverse and illegal. It is argued that the reasons stated by the Court-below for dismissing the application was that the petitioner has transferred some of his assets with the intention to defeat or delay the realisation of the amount due to the creditors. The learned counsel for the revision petitioner relied on the decisions reported in Subramonia Iyer v. Official Receiver 1058 KLT 1195 and Venkiteswaran v. Venkitakrishnan ILR 1981 Ker 558 and argued that there is no annulment of the documents executed by the adjudged insolvent and in the absence of a finding to that effect, the view taken by the Sub-Judge is illegal.

The learned counsel appearing for the respondents has argued that the principles laid down in the decisions referred to above have no application to the facts of this case. It is argued that no question of annulment arises in this case. It is also argued that a petition for annulment can be filed only by the Receiver and not by the creditors. Section 42 of the Act deals with discharge. Section 42(2) says that subject to the provisions of that Section, the Court may, after considering the objections of any creditor and where a receiver has been appointed, the report of the receiver grant or refuse to grant an absolute order of discharge. Section 43 of the Act provides that the Court shall refuse to grant an absolute discharge u/s 42 on proof of certain facts. The provisions contained in Section 43(1) (b) and (i) are relevant in this case. Section 43(1)(b) of the Act read as follows :--

(b) that the insolvent has omitted to keep such books of account as are usual and proper in the business carried on by him and as sufficiently disclose his business transactions and financial position within the three years immediately preceding his insolvency.

(i) that the insolvent has concealed or removed his property or any part thereof, or has been guilty of any other fraud or fraudulent breach of trust."

The 4th respondent State Bank of Travancore has raised a very specific contention that the revision petitioner was running a hotel by name "Sivasakthi" at Alwaye and he had not maintained the proper accounts. The other contesting respondents have raised a contention that the petitioner had sold away his properties to his close relatives. During cross-examination, the petitioner as P. W. 1 had admitted that he was the owner of 9 cents of property at Alwaye and a house was constructed by availing loan from Housing Board. It is also admitted by him that he discharged the debt due to the Housing Board and sold it to a stranger. Further, he had admitted that he was the owner of other properties also at Alwaye Town and he conveyed the properties to his sons. According to him, that is not a gift, but his brother-in-law gave him some money and as demanded by his brother-in-law the properties were assigned to his children. But during the trial of the main proceedings he had admitted that he had gifted those properties to his children. It is also admitted by him that his children are conducting a hotel business. He had further admitted that he omitted to keep books of accounts. Admittedly he was a businessman running a tea shop. So, the failure to maintain accounts is a disqualification. His evidence also shows that he had transferred his property to his children. The evidence shows that the transactions were with fraudulent intention. So, in view of the provisions contained in Section 43(1)(b) (i) of the Act. The revision petitioner is not entitled to get an absolute discharge. The order passed by the Court-below refusing to grant an absolute discharge is perfectly correct. The court below has not committed any illegality and impropriety in passing that order. So, the Civil Revision Petition is only to be dismissed.

In the result, the Civil Revision Petition is dismissed. C. M. P. 5252 of 2001 shall stand dismissed.