HON’BLE SRI JUSTICE N.R.L. NAGESWARA RAO C.M.S.A.No.28 OF 2006 JUDGMENT: The appeal is filed by the Creditor petitioner in I.P.No.16 of 2000 on the file of the Additional Senior Civil Judge, Ongole, against the judgment in A.S.No.144 of 2002 on the file of the II Additional District Judge, Ongole. 2. The appellant has filed an application under Sections 6 and 9 of the Provisional Insolvency Act to declare the 1st respondent as an insolvent since he has alienated some properties in order to defeat and defraud the creditors and he was indebted to a tune of nearly Rs.40,000/- to the petitioner, who is appellant herein, and therefore, an act of insolvency has been committed. The 1st respondent, who was the debtor, admitted the debts of the appellant and also contended that he is having other valuable properties and he has not committed any act of insolvency. He also admitted the act of mortgaging the properties and obtaining the loans. The Insolvency Court after considering the evidence on record, found that there is no material to show that the property is worth of more than Rs.35,00,000/- as claimed by the petitioner or the debtor and though some debts are said to have been discharged under Exs.B.2 to B.20, which itself goes to show that the 1st respondent was indebted heavily to others. The Insolvency Court also took into consideration that if the 1st respondent is financially sound, there was no need for inviting such composition schedule and the act itself provides for inviting for a composition through the Court. Therefore, the Court below found that there is some fraud and the consideration said to have been passed under the mortgages is not properly explained and the account copy of the Vysya bank, which is relied upon by the parties does not reflect such payments and therefore, the mortgages are not real and declared the 1st respondent as an insolvent. 3. Aggrieved by the said order of declaring the 1st respondent as insolvent, an appeal has been filed by the 1st respondent though the mortgagee did not challenge the order of insolvency or the findings therein. The appellate Court in its order has dealt with the evidence of PW.1 and also RW.1 and found that the 1st respondent possessed property worth of Rs.35,00,000/- and mortgage debt is only Rs.18,00,000/- and as such, the 1st respondent has got sufficient assets remaining with him to discharge the debt of the appellant herein, which is less than Rs.1,00,000/- and consequently set aside the order of insolvency passed by the Insolvency Court. 4. The learned counsel for the appellant strongly contends that the approach of the lower appellate Court is not correct and in fact, the finding of the Insolvency Court is that there is no passing of the consideration totally under the mortgages and further it is also the finding of the Insolvency Court that there is no proof of the other assets claimed by the 1st respondent. Evidently, when the property was subject matter of mortgages, which is said to be for Rs.18,00,000/- even if the property is to be taken as Rs.35,00,000/-, then the realisation of the debts of the appellant is very very difficult since there is a priority of the debt over the debt of the appellant. Even otherwise, the act of insolvency is said to be the creation of the mortgages, which was doubted by the lower insolvency Court. When such is the case, it is not permissible to draw an inference from the same mortgages that the value of the property is more than amount that was borrowed under mortgages and therefore, the debtor has got more property and consequently, the petition is to be dismissed. The reasoning of the lower appellate Court is quite erroneous. 5. Therefore, the order of the lower appellate Court is set aside and the matter is remanded to the lower appellate Court to consider afresh with the material available on record and to find out whether there are any other assets of the 1st respondent available for distribution excluding the property, which was mortgaged, which is said to be an act of insolvency and the Court below is also directed to consider all aspects with regard to maintainability of the petition and also the liability of the 1st respondent to be declared as an insolent. The lower appellate Court is directed to dispose of the appeal within three months. 6. Accordingly, Civil Miscellaneous Second Appeal is allowed. There shall be no order as to costs. _________________________ N.R.L. NAGESWARA RAO, J Date:12.09.2011 INL