Sunday 3 February 2013

Wife can file insolvency proceeding against Husband if he fails to pay arrears of maintenance

 The contention of the learned counsel for the respondent is that in the case on hand, it may not be necessary to adjudicate upon as to whether a single creditor can file an insolvency petition against the debtor for here admittedly the decree has been granted by the learned Magistrate in maintenance case, in favour of the respondent, who is the wife of the petitioner herein as well as the minor child, the daughter of the petitioner separately granting maintenance at the rate of Rs. 60/- and Rs. 20/- per month respectively. If that be so, the argument further goes, the question of plurality of the creditors does not arise, even if it is to satisfy the conditions in the case before me is in compliance with the said requisites. Even otherwise, the contention is that as per the decision of a Division bench of this Court in G. Ramachander v. Collector, Excise Hyderabad, 91976) 2 APLJ (High Court) 114: ( AIR 2977 pts 346) at the instance of even a single creditor an insolvency petition is maintainable.
 I am of the undoubted view that a single creditor is certainly entitled to successfully maintain the insolvency petition.

Andhra High Court
K.D. Nagappa vs Sannkka on 15 July, 1982
Bench: S Reddy



1. In this revision the sole but important point that arises for determination is as to whether a single creditor can levy the insolvency proceedings against the debtor. The relevant facts in brief are: the petitioner herein is the husband of the respondent. The respondent filed a petition under section 9 of the provincial Insolvency Act, 1920 against the petitioner herein to adjudge him as insolvent. She had filed earlier a petition in M.C. 11/66 before the judicial first class Magistrate, Adoni, claiming maintenance for hereself and her minor daughter and the same was allowed by hisorder dated 17-2-1967 fixing maintenance amount of Rs. 60/- and Rs. 20/- per month to herself and her minor dughter respectively. In spite of repeated demands, the petitioner did not pay and consequently the respondent had to resort to steps for the realization of the amount for which the petitioner was sent to jail. The petitioner also in order to defeat the rights of the respondent and her minor daughter alienated all his lands on 11-5-1967 for a consideration of Rs. 6,500/- in favour of his mother sister and the maternal aunt. He also aliented two residential houses to them. All these transactions were nominal and were intended to defeat the rights of hte respondent. It is also quite apparent from the nature of hte transactions as they were made only subsequent to the maintenance amount was ordered by the Court. Thus, the petitioner has committed acts of insolvency. Therefore he is liable to pay a sum of Rs. 1, 500/- to the respondent and her minor daughter towards maintenance. Hence the petition by the respondent herein for adjudicating the petitioner herein as insolvent be ordered. The petitioner resisted this stating that the respondent instituted various cases against the petitioner and in order to resist the same the petitioner had to attend various courts frequently and so he could not cultivate the lands, and so for all these reasons the petitioner had to sell the properties in order to discharge the same. Further the respondent is not a creditor within the meaning of section 9 of the provincial Insolvency Act and inasmuch as the petitioner underwent imprisonment for a period of one month due to his failure to pay maintenance amount, the obligation is discharged and therefore the respondent is not entitled to fall back upon the claim. The 1st Court allowed the petition which was also affirmed by the appellate Court. Hence this revision petition.
2. The sole point that is canvassed by the learned counsel for the petitioner is that the single creditor cannot successfully maintain insolvency petition against the debtor for which he relied upon the following decisions In sanjeevi Reddy v. Elappa reddy, Gopalarao Ekbote J., held:
"...... I am clearly of the opinion that section 6 (b) applies only when a debtor transfers his property with a view to defeat or delay all the creditors. Where therefore a debtor transfers his property to any creditor of his and pays out of the sale proceeds some of his creditors the transfer not being one with an intent to defeat or defraud all the creditors, the transfer does not amount to an Act of insolvency on the part of the debtor within the meaning of s. 6 (b) of the Act".
It was further held:
".............. A mere finding that the effect of a transfer would be to defeat one creditor obviously is insufficient. It must be proved, if that provision is to be attracted, that as a matter of fact the transfer was made with an intent to defeat the creditors as a whole".
In M. Somiah v. P. Padma Bai, (1969) 2 Andh WR 274 Kondaiahm J., held:
"........ the jurisdiction of the Insolvency Court could be exercised only, if there are more than one creditor and not otherwise" In maung NYun Tin v. Saw Eu Hoke, AIR 1935 Rang 281 a Division bench of the Rangoon High Court held:
"Moreover under section 6 (d) of provincial Insolvency Act, it is an essential feature of an Act of insolvency that the Act should be done with intent to defeat or delay the creditors generally of the debtor. It is insufficient to allege or to prove that the Act was done with intent to defeat or delay any particular creditor.......... and an attempt by a debtor to deprive any one creditor of the fruits of a decree against him is not an Act of insolvency".
In Niyati bhusan v. Bejoy Chandra, a Division Bench of the calcutta High Court held (para 9):
"...................in order that a creditor may file an insolvency petition agianst a debtor on the ground that he has committed an Act of insolvency by transferring his property it must be shown that the transfer was m,ade with intent to defeat or delay the creditors of the debtor generally and not some particular creditor or creditors".
In Sarangapani v. Perumal, a diviaion Bench of the Madras High Court wherein a single creditor as there were no creditors to the debtor filed an application under section 9 for adjudication of the debtor as an insolvent and also under section 6 (d) (ii) snf (iii) of the provincial Insolvency Act after referring the decision in maung Nyun Tin v. Saw Eu Hoke (AIR 1935 Rang 281) cited supra, held (para 6):
"But we are clearly of the opinion that this argument is fallacious. When we proceed into the facts of, AIR 1935 Rang 281, we see that there were several creditor of the parties concerned and that the attempt was only to defeat or delay the execution of the decree of one particular creditor, who was clearly attempting to run a race ahead of the rest. But, on the facts of the present case, this proposition cannot apply, for here we have only the sole creditor, who represents in himself the general body of creditors. We think it is obvious that a man may attempt to elude or evade a particular creditor amongst several creditors, for reasons of his own, which may not at all amount to an Act of insolvency; for instance, that particular creditor may be obnoxious in pursuing methods in relizing his debt, even though the debtor has sufficient means to pay off all the creditors. The decision cited has to be clearly distinguished, for in the present case, there is only the sole creditor, and the appellant definitely attempted to evade this creditor who represents the general body of creditors, by departing from his dwelling house and usual place of business and by secluding himself".
In G. Ramachander v. Collector, Excise Hyderabad, a division bench of this Court, wherein the decision of Gopalrao Ekbote, J., in sanjeevi Reddy v. Ellappa reddy, 1966 (2) Andh WR 93: (AIR 1966 Andh Pra 243) cited supra was not cited and therefore did not discuss the implication of th said decision but the decision of Kondayya, J., in somiah v. Padma Bai (1969 (2) Andh WR 274) cited supra was cited and after referring to the said decision held (para 5 of AIR):
"The question of maintainability of an insolvency petition against a single creditor came up for consideration in somiah v. Padma bai (1969-2 Andh WR 274). That was a case arising under the Hyderabad Insolvency Act. But the material provisions of that Act are almost identical with the provisions of the provincial Insolvency Act. The learned Judge, noticing the words "debts' and 'Creditors' used in several of the provisions, opined that "as far as the scheme of the Hyderabad Insolvency Act as well as the scheme of the provincial Insolvency Act, 1920 are concerned, the very purpose of the exercising of the insolvency jurisdiction ,in any given case, is only for the benefit of the body of the creditors and not for the benefit of any single creditor". We are unable to endorese the view of the learned Judge in that case. The object of enacting the insolvency law is to give relief to a debtor, who is unable to discharge the debts and protect him from harassment by his creditors and also to prevent a scramble among creditors to somehow get at the assets of debtor fraudulently or in collusion between creditor and debtor. The Act also provides a machinery by which the claims of genuine creditors could be equitably met. We see no special significance in the legislature using the words 'creditors' and debts'. From the mere use of those words in plural, the object or the underlying policy of the insolvency law cannot be ascertained. The scheme object and purpose of the Act can be ascertained on a proper construction of the relevant provisions. The expressions 'creditor' and debtor' have been defined. Creditor' includes a decree-holder, 'debt' includes a Judgment-debt and debtor includes a judgment- debtor . section 6 details the acts of insolvency in each of the cases enumeratedin Cls. (A) to ( H). Sec 7 entitles a creditor or debtor to make an application for adjudiciating a debtor as insolvent. A debtor can file an application if he commits an Act of insolvency. Section 10 lays down the conditions to be satisfied to entitle a debtor to present an insolvency petition.........."
It further held (para 5):
"Therefore, no special significance need be attached to the words 'debts' or 'creditors' used in several of the provisions of the provincial Insolvency Act".
3. Before answering, however the question raised herein, relevant statutory provisions may be noticed:
section 6 reads as under:
"6. A debtor commits an Act of insolvency in each of the following cases. Nemely:-
(a) if in (India ) or elsewhere he makes a transfer of all or substantially all his property to a third person for the benefit of his creditors genrally:
(b) if, in (India) or elsewhere he makes a transfer of his property or of any part there of with intent to defeat or delay his creditors;
(c) if, in (India) or elsewhere, he makes any transfer of his property or of any part thereof, which would under this or any other eanctment for the time being in force be void as a fraudulent preference if he were adjudged an insolvent;
(d) if, with intent to defeat or delay his creditors,-
(i) he departs or remains out of (the territories to which this Act extends),
(ii) he departs from his dwelling house or usual place of business or otherwise absents himself,
(iii) he secludes himself so as to deprive his creditors of the means of communicating with him;
(e) if any of his property has been sold in execution of the decree of any Court for the payment of money.
(f) if he petitions to be adjudged an insolvent under the provisions of this Act:
(g) if he gives notice to any of his creditors that he has suspended or that he is about to suspend, payment of his debts; or
(h) if he is imprisoned in execution of the decree of any Court for the payment of money."
Section 7 reads as under:
"Subject to the conditions specified in this Act, if a debtor commits an Act of insolvency, an insolvency petition may be presented either by a creditor or by the debtor and the Court may on such petition make an order (hereinafter called an order of adjudication) adjudging him an insolvent".
Explanation: The presentation of a petition by the debtor shall be deemed an Act of insolvency within the meaning of this section, and on such petition the Court may make an order of adjudication".
Section 9 reads as under:
"section 9 (1) A creditor shall not be entitled to present an insolvency petition against a debtor unless-
(a) the debt owing by the debtor to the creditor or if two or more creditors join in the petition the aggregate amount of debts owing to such creditors, amount to five hundred rupees, and
(b) the debt is a liquidated sum payable either immediately or at some certain future time, and
(c) the Act of insolvency on which the petition is grounded has occurred within three months before the presentation of the petition'.
4. The contention of the learned counsel for the respondent is that in the case on hand, it may not be necessary to adjudicate upon as to whether a single creditor can file an insolvency petition against the debtor for here admittedly the decree has been granted by the learned Magistrate in maintenance case, in favour of the respondent, who is the wife of the petitioner herein as well as the minor child, the daughter of the petitioner separately granting maintenance at the rate of Rs. 60/- and Rs. 20/- per month respectively. If that be so, the argument further goes, the question of plurality of the creditors does not arise, even if it is to satisfy the conditions in the case before me is in compliance with the said requisites. Even otherwise, the contention is that as per the decision of a Division bench of this Court in G. Ramachander v. Collector, Excise Hyderabad, 91976) 2 APLJ (High Court) 114: ( AIR 2977 pts 346) at the instance of even a single creditor an insolvency petition is maintainable.
5. I am (in agreement?) with the learned counsel for the respondent.
6. No doubt the decisions of this Court by two learned single Judges which have taken the contra view namely that a single creditor cannot institute an insolvency petition against the debtor but one such decision has been overruled bya Division Bench of this Court. Though it is true that a Division Bench of the Rangoon High Court as well as the calcutta High Court have taken the view at variance with the division Bench's decision of this Court as well as Bench's decision of this Court as well as Madras High Court but in my judgment, the view adopted by the division bench of this Court as well as Madras High Court is correct. In order to examine the position as to whether even a single creditor can file an insolvency petition for adjudication of the debtor as insolvent the object of the Act as has been very rightly stated by the division bench of this Court, is to give relief to a debtor, who is unable to discharge the debts and protect him from harassment by his creditors and also to prevent a scramble among creditors to somehow get at the assets of debtor fraudulently or in collusion between creditor and debtor of the madras High Court (Sarangapani v. Perumal) cited supra. Now, coming to the factual side of the case there are two decrees in effect, though drawn up under a single decree one in favour of the respondent who is the wife of the petitioner and nother in favour of the daughter of the petitioner herein, therefore that obviates the necessity of adjudicating as to whether a single creditor can institute an application for adjudicating the debtor as insolvent. Even otherwise, I am of hte undoubted view that a single creditor is certainly entitled to successfully maintain the insolvency petition. Viewed from any angle the petition filed by the respondent herein under section 9 of the provincial Insolvency Act is maintainable. In the circumstances no interference is warranted with the order under revision and the contentions of the learned counsel for the petitioner which are devoid of merit and substance are rejected.
7. In the result, the revision petition is dismissed with costs.
Revision dismissed.
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