JUDGMENT
Raj Kishore Prasad, J.
1. This is an appeal by one of the creditors under Section 75 of the Provincial Insolvency Act (Act V of 1920) from the order of the learned Additional District Judge of Patna dated 13-8-1955, making an order of adjudication in favour of the debtor-respondent No. 1 under Section 27 (1) of the Act.
2. This appeal is not opposed by the respondents. Mr. Chuni Lal, whose name appeared in the list for the respondents, stated that he had no instructions in the appeal, and, therefore, he retired.
3. The only argument presented for determination, by Mr. Sarwar Ali, in support of the appeal, was that the court below had not followed the procedure indicated in Section 24 (1) (a) and its proviso, of the Act. He developed his argument by submitting that in the insolvency petition presented by the debtor-respondent, he did not state either the date of the two handnotes or even the fact as to when they were repayable which alone could show whether those handnotes were subsisting or had become barred by time.
He further submitted that even at the hearing stage, the debtor-applicant did not take any step either to examine his creditors from whom, he alleged, he had taken loans on handnotes, or, even to call for the handnotes from them, which could satisfy the court whether those debts which were mentioned in the petition were fictitious or not, and, whether the conditions precedent required by Section 10 (1) of the Act had been complied with.
4. In support of his contention Mr. Sarwar Ali relied on Sections 10 (1) (a) and 24 (1) (a) and its Proviso, and also on a Bench decision of this Court in Ganesh Lal Sarawgi v. Sanehi Ram, ILR 12 Pat 107: (AIR 1933 Pat 43) (A). In my opinion, the contention of Mr. Sarwar Ali is well-founded, and it must prevail.
5. Section 10 (1) (a) of the Act reads as follows :
10 (1) “A debtor shall not be entitled to present an insolvency petition, unless he is unable to pay his debts and-
(a) his debts amount to five hundred rupees; or
xx xx .”
6. Section 10 (1) lays down the conditions on which a debtor may present an insolvency petition. Section 10 (1) provides that a debtor shall not be entitled to present an insolvency petition unless he
as unable to pay his debts. This is the first condition which must be satisfied by the debtor. Section 10 (1) in the different Clauses (a) to (c) further lays down the other alternative conditions which also must be satisfied,
Section 10 (1) (a), with which we are concerned, further provides that, over and above the fact that the debtor is unable to pay his debts, his debts must amount to five hundred rupees. We are not concerned here with Clauses (b) and (c), and, therefore, it is not necessary to refer to these other alternative conditions. We, therefore, find that under Section 10 (1) (a) the two conditions which must co-exist are ; first, that the debtor is unable to pay his debts, and, second, his debts amount to Rs. 500.
These two conditions, which are pre-requisite for presentation of an application for insolvency by a debtor, must be established in every case. On the failure of either, the debtor’s application for insolvency must fail, if his case is governed by Section 10 (1) (a).
7. In the present case, it is true, in the insolvency application itself it was mentioned by the debtor-respondent that he was unable to pay his debts and that his debts amounted to five hundred rupees. But this fact was challenged by the creditor appellant. His case was that the alleged two loans on handnotes were fictitious, and, therefore, the debts did not amount to Rs. 500.
8. The question here, however, is : Is mere mentioning o£ these two facts legally sufficient for a debtor to obtain an order, of adjudication from the court?
9. To answer this question it is necessary to read Sections 13 and 24 of the Act. Section 13 (1) (d) provides that every insolvency petition presented by a debtor shall contain the amount and particulars of all pecuniary claims against him, together with the names and residences of his creditors so far as they are known to, or can by the exercise of reasonable care and diligence be ascertained by him. In the present case, the debtor simply mentioned names of two persons in whose favour the alleged handnotes had been executed by the debtor for different items. The debtor did not mention in his application the dates of two handnotes from which it could be inferred whether these were subsisting loans.
10. The question, therefore, is, if this mentioning only of the names of the creditors and amount of loans is sufficient compliance with Section 13 (1) (d) of the Act. In my opinion, it is not. In order to determine whether the loans taken on the basis of the two handnotes were subsisting or not, or, when they would be barred by limitation, it was necessary to mention further the dates of tile handnotes in order to enable the court to find out whether these two handnotes really existed either in fact or in law. In my opinion, the insolvency petition presented by the debtor did not, therefore, comply with the provisions of Section 13 (1) (d) of the Act.
11. Section 24, however, is more important, in that, it lays down the procedure for the hearing of insolvency petitions. Section 24 (1) (a) with the proviso may be reproduced in extenso here, as the decision of the present appeal turns on the interpretation thereof.
24. (1) “On the day fixed for the hearing of the petition or on any subsequent day to which the hearing may be adjourned, the Court shall require proof of the following matters, namely:
(a) that the creditor or the debtor, as the case may be, is entitled to present the petition :
Provided that, where the debtor is the petitioner, he shall for the purpose of proving his inability to pay his debts, be required to furnish only such proof as to satisfy the Court that there are prima facie grounds for believing the same and the Court, if and when so satisfied, shall not be bound to hear any further evidence thereon.”
12. From the above Section it is manifest that at the hearing of the insolvency petition, the court shall require proof of the fact if the applicant, whether he be the creditor or the debtor, is entitled to present a petition for insolvency. This obviously refers back to Section 9 and Section 10 which lay down the conditions on which a creditor and a debtor respectively may present an insolvency application.
As we are concerned here with a debtor, his case would be governed by Section 10 of the Act. In the case of a debtor, therefore, the Court is bound to require proof of the fact that the debtor is entitled to present his insolvency petition under Section 10 (1) of the Act.
13. The proviso to Section 24 (1) (a), however, further provides that where the debtor is the petitioner, he shall for the purpose of proving his inability to pay his debts, be required to furnish only such proof as to satisfy the Court that there are prima facie grounds for believing the same and the Court, if and when so satisfied, shall riot be bound to hear any further evidence thereon.
14. The question then arises as to what is the duty of the Court, in the case of a debtor, which is postulated by Section 24 (1) (a) and the Proviso to Section 24 (1) (a) of the Act?
15. Section 24 (1) (a) and its Proviso have been considered in the case of ILR 12 Pat 107 : (AIR 1933 Pat 43) (A), referred to before. In this case, their Lordships Courtney Terrell, C. J., and Fazl AH, J., as he then was, kid down that the Court must treat the evidence produced by following the procedure prescribed in Section 24 as material to its decision as to whether or not to allow the petition and in deciding whether such evidence has satisfied the Court that there are prima facie grounds for believing the statements in the petition. The statements in the petition by themselves, if merely repeated formally in the evidence, are not sufficient prima facie grounds for believing such statements.
16. Their Lordships, in the just mentioned case, have deprecated the tendency of courts administering the Insolvency Act to treat the hearing of an insolvency petition by a debtor as a more or less formal matter. The learned Chief. Justice, with whom Fazl Ali, J., agreed, at page 111 (of ILR Pat): (at p. 44 of AIR), observed as below:
“There has been a tendency for courts administering the Insolvency Act to believe that the hearing of a petition is a more or less formal matter and that if the petition is, as it were, merely verified by the evidence of the debtor the Court is bound to accede to the petition. That is not the case. It is the duty of the Court to be satisfied prima facie and after following the necessary procedure and making the necessary investigation to come to a conclusion that the statements by the debtor are true. After all the procedure of insolvency is for the protection of creditors quite as much as for the protection of debtors. It is unfortunately more often used by debtors than by creditors with the consequence that the interest of the creditor has a tendency to be forgotten.”
17. Applying the above principle to the present case, I have no doubt in my mind that the decision of me court below cannot be sustained. The debtor examined himself, but he did not take any
steps, as I have said before, either to examine his so-called creditors, or, to get even the alleged hand-notes produced in the court. The appellant, who was one of the creditors, challenged the genuineness of these two loans and his case was that the amount of debt was below Rs. 500/-, and, therefore, the debtor was not entitled, in law, to present an insolvency application in terms of Section 10 (1) (a) of the Act.
If these loans under the handnotes are eliminated from consideration, then there is no doubt that the amount of debts would be less than Rs. 500/-, and, the debtor would not be entitled to present an insolvency application, and the respondents present application, in view of Section 10 (1) (a) of the Act, was, therefore, liable to be rejected on this ground alone.
18. In these circumstances, when these two loans were challenged, and, when on the existence of these loans alone he was entitled to present an application for his insolvency under Section 10 (1) (a) of the Act, it was the duty of the debtor to examine the creditors or to take steps to get the handnotes produced in court. The debtor did neither, and, therefore, it cannot be said that there was prima facie ‘evidence to satisfy the court that the debtor was entitled to present an insolvency application in terms of Section 10 (1) (a) of the Act.
The court below has simply relied on the evidence of the debtor who repeated in his evidence what he had said in his petition. But that, in my opinion, was not sufficient to discharge his obligation envisaged by the proviso to Section 24 (1) (a) and Section 24 (1) (a) of the Act to satisfy that the Conditions precedent for presenting the insolvency application as required by Section 10 (1) (a) had been complied with. The learned Additional District Judge did not apply his mind to this aspect at all.
19. For these reasons I would set aside the order of the court below adjudicating the debtor-respondent No. 1 as insolvent, and, allow the appeal, and remit it to the court below for a fresh disposal of the debtor’s insolvency application in accordance with law.
20. I would, however, make no order for
costs as the appeal has not been contested.