P L D 1957 (W (PLP)

INAMULLAH, J.

This is an application under section 16 of the Insolvency (Capital of the Federation and Dacca) Act, and arises under the following circumstances :- The petitioner filed a petition under section 12 of the said Act for adjudicating the debtor as insolvent. The grounds, shortly put are these ;- The debtor is indebted to the creditor-petitioner in the sum of Rs. 10 lacs, which is payable by the debtor under a promissory note, dated the 12th February 1953. A suit in respect of the amount due on this promissory note has been filed in this Court on the 5th May 1956. The grounds of the acts of insolvency, as alleged in the petition, are twofold: (i) The debtor left Pakistan with intent to defeat or delay his creditors, on the 10th June 1956 ; (ii) The debtor has transferred his assets in the shape of shares and securities, moneys and credits from Pakistan to Beirut or other places in Europe and U. S. A. The insolvency petition was filed on the 27th July 1956. An application for the appointment of an interim receiver was made on the same day, and in order to preserve the property during the pendency of the petition, I appointed the Official Assignee as the interim receiver on the 27th July 1956. An application was made on the 28th July on behalf of the debtor for vacating the interim order that I had passed. By consent of the learned advocate for the petitioner, I modified my interim order appointing the Official Assignee as receiver to this extent that the debtor was allowed to run business under the supervision of the Official Assignee. I have heard the learned advocates at great length, though I think that the point involved so far as the present applica tion is concerned is very simple. At this stage what I have to see is whether any prima facie case has been made out by the petitioner for adjudicating the debtor as insolvent. If a prima facie case has been made out, the interim order appointing the Official Assignee as receiver would be made absolute. Mr. Dingomal, the learned advocate for the petitioner has conceded that his petition is based on two-fold grounds of the acts of insolvency mentioned under section 9 of the Insolvency Act, i.e., section 9 (b) and (d) of the Insolvency Act, which runs as under :- "

9. A debtor commits an act of insolvency in the following cases, namely :- (b) If, in the Provirices and the Capital of the Federation or elsewhere, he makes a transfer of all or substantially all his property to a third person for the benefit-of his creditors generally ; (d) If, with intent to defeat or delay his creditors- (i) he departs or remains out of the Provinces and the Capital of the Federation. (ii) he departs from his dwelling-house or usual place of business or otherwise absents himself, (iii) he secludes himself so as to deprive the creditors of the means of communicating with him." I would consider these two contentions of Mr. Dingomal separately .- I would first consider the contention that the debtor left Pakistan with intent to defeat or delay his creditors. So far as this ground is concerned, I may dispose of this question in the light of what has been stated by Mulla at page 91 of his Commentary, III Edn., para. 119 reads as under:- "Absenting oneself is no act of insolvency, unless it be with intent to defeat or delay creditors. Whether that intention exists is a question of fact. Thus if a debtor departs from his place of business with all his available cash with the avowed object of defeating a threatened attachment, it is clearly an act of insolvency. If a trader shuts up his shop during business hours, or departs from his dwelling-house without leaving instructions where he is to be found if creditors call, or without making arrangements for carrying on his business, he must be presumed to have left to avoid his creditors ; but the absence may be satisfactorily accounted for and the presumption may be rebutted. No such presumption, however, arises, where the debtor has left a representative behind, or has left a direction that letters are to be addressed to him at a particular place. A departure to avoid an arrest, though under a groundless misapprehension, is an act of insolvency. In cases of departure, length of absence is immaterial if the intent be proved, as the act of insolvency is complete at the time of departure". Keeping the above principle in view, I have to consider whether the circumstances which have been urged by Mr. Dingomal for the petitioner lead to the conclusion that the debtor left Pakistan with the requisite intention mentioned in section 9 (d) of the Insolvency Act. So far as the question of the departure of the debtor from Pakistan is concerned, that is conceded. The only question is whether the debtor left Pakistan with intent to delay or defeat his creditors as provided in section 9 of the Insolvency Act. Mr. Dingomal has sum marised the circumstances on which he relied in support of his contention that the requisite intention has been made out, as under :- (i) The debtor came from Bombay in 1948 to avoid payment of income tax dues to the Income Tax authorities in India. (ii) The debtor does not own any immovable property in Pakistan and is not married, and, therefore, has no permanent attachment in Pakistan. , (iii) The debtor has qualified for permanent residence in America. Mr. Dingomal contended that the debtor had married an American lady, whom he has now divorced, that he had lived in America for about 3 years, and that his son is an American citizen. (iv) The debtor having come to know that a suit had been filed against him on the 5th May 1956, for about ten lacs of rupees together with interest, left Pakistan. (v) The debtor has not sufficient funds to meet his financial liability. (vi) The debtor was in fear of the consequences of the suit filed against him. (vii) The debtor had contemplated to stay in the Middle East in order to dispose of the securities. (viii) The debtor avoided the service of the summons of the suit on the 6th May 1956. (ix) The debtor had dispensed with the services of two of his agents who were dealing with his business of stock brokers. (x) The debtor had come back on the 18th August 1956 only to see that this petition is dismissed and he is able to liquidate his assets finally to go away. Before I consider these circumstances in the light of what has been urged by Mr. Farooqui for the debtor, I may decide whether the petitioner creditor was at this stage entitled to have the assistance of the account books and other documents of the debtor in order to make out a prima facie case or not. I am definitely of the view that he is not entitled to call them account books of the debtor to make out a prima facie case. Mr. Dingomal has relied on certain authorities which lay down that a petitioner-creditor can rely at the time of hearing of the petition on the account books of the debtor in order to prove that an act of insolvency has been committed. That may be so. But that stage has not yet arrived. To order the production of the account books of the debtor at this stage in order to help the petitioner to make out a prima facie case, would mean that one has only to file a petition alleging that the debtor has committed an act of insolvency within the meaning of section 9 of the Insolvency Act and to have the account books of the debtor summoned. In my opinion, this is not permissible under the Act. For the admission of the petition itself it is necessary that the petitioner must allege the acts of insolvency committed by the debtor and he must specifically mention the facts upon which he relies. The question of reference to the account books of the debtor may arise at the time of the final hearing if the debtor were to deny the acts of insolvency which are attributed to him. This question, however, can only arise if the petitioner has given particulars of the acts of insolvency, and not otherwise, I see no force in the contention of Mr. Dingomal that he can have the assistance of the account books of the debtor at this stage. I may also mention that such a principle is likely to do great harm to the debtor. There are many secrets of the trade which no businessman would like to be divulged. If this principle as contended by Mr. Dingomal, were conceded, a person has only to make an application under the Insolvency Act in order to know the secrets of the business of the other person. I would now consider the contention of Mr. Dingomal as regards the requisite intention under section 9 (d) of the Insolvency Act. The circumstances on which Mr. Dingomal has relied I have reproduced verbatim already. No other circumstances has been relied upon by Mr. Dingomal to prove the requisite intention. I may state that the settled law is that the intention contemplated by section 9 of the Insolvency: Act has to be deduced from the proved facts and circumstances of each case. No hard and fast rule can be laid down as to the circumstances from which the requisite intention can be inferred. It is, however, the duty of the petitioner to prove the same. In the present case, the circumstances alleged by Mr. Dingomal are fully met by positive circumstances alleged and proved by the debtor. I may also state that the mere fact that a person left his residence cannot lead to the inference that he has gone with the intent of defeating or delaying his creditors, unless there are other facts ands circumstances to support an inference. In the present case, the conduct of the debtor appears to negative the contention of Mr. Dingomal that he left Pakistan in order to delay or defeat his creditors. The debtor obviously knew of the institution of the suit on the basis of the promissory note. Before his departure he executed a power-of-attorney in favour of one of his employees to look after the case which was filed on the basis of the promissory note. He also wrote a letter to the Official Assignee informing him that he was going out of Pakistan and was likely to come back by July, and that the Official Assignee may, in the meantime, deal with one Dever, one of his employees. The Official Assignee was the Receiver in respect of another suit which was going on between the debtor and one Irani regarding accounts. Mr. Lakhani, an advocate of this Court, also made an application dated the 15th June 1956, in the suit on the basis of the promissory note, that if any interim application was made on behalf of the present petitioner he may be informed. Another fact which has not been disputed by the learned advocate for the petitioner is that the salary of the establish ment maintained by the debtor at Karachi and Lahore comes to about Rs.15,000 per month. The debtor, it is fully established before me, has been paying this amount to the establishment upto the date of the petition, and even now. Another circumstance in favour of the debtor is that the debtor has as many as nine concerns at Karachi which are disclosed in the petition of the petitioner under section 16 of the Insolvency Act. The business of these concerns is still going on. In fact, the report of the Official Assignee would show that the business of these various concerns is running in its normal way. It is clear from the report of the Official Assignee, which I had called upon him to submit, that there is nothing unusual about any of these concerns which would lead one to an inference that the debtor has ever intended to liquidate the same with an intention to delay or defeat his creditors. The value of these circumstances cannot be minimised. The debtor could not have foreseen filing of the present petition under the Insolvency Act on the 27th July 1956. It cannot be said, therefore, that the letter to the Official Assignee or the application made by Mr. Lakhani was an after-thought. Moreover, the very fact that he had all his various concerns running and had made arrangements for payment of salary to the establishment which came to about Rs. 15,000 per month, would also show that the debtor had not gone for good. Lastly, the fact that the debtor actually came back on the 18th August 1956 would also completely meet the argument of Mr. Dingomal as regards the requisite intention. The circumstances which I have dealt with above in favour of the debtor are such which are not mere inferences based on conjectures but have been satisfactorily established before me. From these circumstances the only reasonable inference that can be drawn is that the debtor had not left with intent to defeat or delay his creditors. I may also add that all these various circumstances, which have now been relied upon by Mr. Dingomal, do not find place in his petition. They are all after-thought. The petitioner, in my opinion must allege the circumstances from which the inferences are sought to be drawn. In the present case the petition is al very short one ; they are only four paragraphs. The only circumstance which is mentioned in the petition as regards the debtor's intention is that he had been to Beirut with the intention of disposal of all his securities. Perhaps an inference is so to be drawn from this that the debtor had taken away all his securities to dispose of at Beirut, and, therefore, there was no reason for him to come back to Karachi as there were no other assets left in Karachi. Some more facts are alleged in the affidavit filed in support of the application under section 16 of the Insolvency Act for the appointment of a Receiver, which I have already mentioned above. These facts are vague and can hardly lead to the conclusion that the debtor left Pakistan with the requisite intention. There is another fact which cannot be left out of consideration. The petitioner and the debtor had been admittedly on very intimate terms. Both of them are business men. The petitioner may have known the extent of business of the debtor and also could have known easily if the debtor was liquidating his business. The suit on the basis of the promissory note was filed on the 5th May 1956, while the petition under the Insolvency Act was filed on the 27th July 1956. Almost two months intervened between the filing of the present petition and the suit on the basis of the promissory note. A business of the extent that the debtor is carrying on cannot be liquidated over-night. It must take a few months before it can be liquidated. The petitioner would have certainly come to know if the debtor was doing anything of the nature suggested by Mr. Dingomal. Moreover, the debtor left Pakistan on the 10th June 1956, for the United Kingdom, while the present petition was filed on the 27th July 1956. The long delay of about one month in filing the present petition has not yet at all been explained ; at any rate it has not satisfactorily been explained. There is no satisfactory reason whatsoever given by the petitioner as to why, if the debtor had left Pakistan for good on the 10th June 1956, and had taken away all his securities with him, the petition was not filed immediately thereafter. In fact, the petitioner knew about the programme of the debtor which is clear from his application dated the 5th May 1956, under Rule 110 of the Sind Chief Court Rules praying that he may be allowed to file the suit on the basis of the promissory note as the debtor was likely to go abroad and that there would be difficulty in service. If the petitioner knew about the movements of the debtor, it was the duty of the petitioner to have shown to the satisfaction of this Court why he did not file the present petition immediately after the departure of the debtor. These considerations lend great support to the argument of Mr. Farooqui that the insolvency petition is only an after-thought and has been actuated only with a view to harass the debtor. In fact, if the debtor had left Pakistan with the intention as is now ascribed to him, the petitioner should have made some application or the other under the provisions of the Code of Civil Procedure by way of attachment or injunction in order to safeguard his interests in the suit filed by him on the basis of the promissory note. The absence of any such step on the part of the petitioner would also lead to the conclusion that the present petition is only an after-thought and has been filed without any substantial reason or basis. Mr. Farooqui, the learned advocate for the debtor, relied on the case of Ex parte Griffin, In re Adams (1879 L R (C D) Vol. XII, at p. 480), in support of his contention that where a petition is filed with an ulterior motive, the same should be dismissed. I do not think that it is necessary to express any view on this aspect of the issue raised by Mr. Farooqui. The other contention of Mr. Dingomal was that the debtor has transferred his property within the meaning of section 9 (b) of the Insolvency Act with a view to defeat or delay his creditors. In this connection I would reproduce what the petitioner says in this petition regarding the transfer of property ; para. 2 (c) runs as under :- "That with intent to defeat or delay his creditors he has made transfers of his considerable assets in the shape of shares and securities, moneys and credits, etc., from Pakistan to Beirut or other places in Europe and U. S. A." It is clear from the above statement of fact that the only transfer alleged by the petitioner is of shares, moneys and credits. In the first place, it is not clear from this statement of fact whether the shares, securities, moneys and credits are alleged to have been transferred to some one else or to the petitioner's own account. I need not comment upon the fact that an allegation could not be more vague about the transfer of property than what is stated in para. 2 (c) of the petition. In fact, though the petitioner has filed other affidavits now he has not been able to give any particulars whatsoever of these shares, securities and other assets. Mr. Farooqui contended that the transfer of the property contemplated by section 9 (b) of the Insolvency Act would mean transfer to a third party, and not to oneself. There is great force in this contention, and he is also supported by Isitt v. Beeston ((1867) L R 8 Ex. 26). Mr. Dingomal has not been able to show any authority in support of his contention that the transfer of property within the meaning of section 9 (b) would also include transfer of money to oneself. On the face of it this contention of Mr. Dingomal has no force. In order to defeat or delay his creditors, transfer of property by a debtor must be to some one else, and not to one-self. So long as the debtor's assets lie with himself the same can always be seized upon his being adjudged insolvent. I have no doubt after perusing the affidavits filed on behalf of the debtor that the allegation about the transfer of assets in the shape of securities, shares, moneys and credits has not been made out. The allegations in para. 2 (c) cannot be taken into account in view of the fact that they do not give any particulars, and are just bare vague allegations. Moreover, the short answer, as has been rightly urged by Mr. Farooqui, is that neither money nor securities in any shape or form can be transferred from Pakistan to any other country without the agency of the State Bank of Pakistan. The argument of Mr. Dingomal was that number of persons surreptitiously take away money and securities from Pakistan to other countries. I cannot take any judicial notice of any such fact even if true. A person is presumed to act in conformity with law, and not in contravention of law. The presumption is in favour of innocence, and not in favour of guilt. No person who is flying from Pakistan to any outside place can take more money or any security in any form whatsoever unless he has the permission of the State Bank of Pakistan under the Foreign Exchange Regulations. The suggestion by the petitioner that the debtor, or Purveez Minwalla, had take away any security or money from Pakistan has no basis. I am inclined to be of the view that these are mere allegations made to obtain a temporary relief by way of appointment of a Receiver. I have no doubt in my mind upon a 'careful consideration of all the circumstances and facts of the case that the petitioner has failed to make out a prima facie case either under clause (b) or clause (d) of section 9 of the Insolvency Act. I would, for the reasons given above, dismiss the petition, and withdraw the interim order appointing the receiver. The receiver to hand over all papers and documents that he may have of the various concerns in his charge. The petition is dismissed with costs. A. H. Petition dismissed.