Case: Firm Mukand Lal Veer Kumar &amp; Anr Vs. Sri Purushottam Singh &amp; Ors

2. Appellant No. I is a registered firm of which appellant No. 2, Mukund Lal and respondent No 7, Ram Surat Misra are the only two partners. The firm carried on Arhat (Commission Agency) business. Three petitions under the Provincial Insolvency Act (Act V of 1920), hereinafter called the Act, were made against the firm and its two partners under S. 7 of the Act. Purushottam Singh, respondent No. 1 and Sat Narain Singh, respondent No. 2 filed the first petition (Petition No. 9 of 1958) on April 28, 1958. The second petition was filed by Smt. Tara Devi, respondent No. 3 and Shyam Das, Respondent No. 4 on May 30, 1958 which was registered as Petition No. 19 of 1958. The third petition was filed by Jivenda Mal on January 20, 1959 which was registered as Petition No. 2 of 1959. In petition No. 9 of 1958, a sum of Rs. 15,780 was claimed; in petition No. 19 of 1958, a sum of Rs. 14,545 was claimed and in petition No. 2 of 1959 a sum of Rs. 3,884 was claimed but other creditors also filed their claims to the extent of Rs. 96,000. In all these petitions it was alleged that the firm and its two partners had committed acts of insolvency and therefore they should be declared insolvents. The firm and its partners contested the petitions and asserted that they had already paid a sum of Rs. 3,50.000 to other creditors and they were in a position to pay all the creditors and had not committed any acts of insolvency. All the three insolvency petitions were consolidated together and were heard by the Insolvency Judge, Varanasi who by his judgment dated August 8, 1959 adjudicated the firm and its two partners as insolvents. Thereafter, the firm and its two partners filed three appeals under S. 75 of the Act but all these appeals were dismissed by the Additional District Judge Varanasi by his judgment dated February 28, 1960. Thereafter the firm and its two partners took the matter in revision to the Allahabad High Court which partly allowed the revision applications and set aside the order of the lower courts adjudging Ram Surat Misra, respondent No. 7, one of the partners of the firm as insolvent. The rest of the order declaring the firm and its other partner, Mukand Lal as insolvent was confirmed.

Reasoning:
It is true that under S. 47 of the Indian Registration Act once a document is registered the effect begins to commence from the date of execution, but if the document is not registered it can never have any legal effect as a deed of gift. Under S. 49 of the Indian Registration Act it is provided that no document required by S. 17 or by any provision ofthe Transfer of Property Act, 1882, to be registered shall affect any immovable property comprised therein unless it has been registered. The section necessarily implies that such a document by reason of its execution alone cannot have the effect of transferring the property. In the present case, therefore, the deed of gift executed by Mukund Lal in favour of Veer Kumar dated October 31, 1957 cannot be considered to be an act of insolvency unless a valid transfer of property was made by that document and such a valid transfer could be said to have been made only when the document was registered on March 11, 1958In our opinion this argument is well founded and must be accepted as correct. We think that in order to support an adjudication against a firm there must be proof that each of the partners has committed some act of insolvency is relied upon it must be shown to be the act of all the partners. An order for adjudication can also be made against a firm if there was an act of insolvency by an agent of the firm which was such as must necessarily be imputed to the firm. The Explanation to S. 6 of the Act says "for the purpose of this section the act of the agent may be the act of the principal". The Explanation does not lay down that an act of insolvency of the agent shall be attributed to the principal but that it may be treated as the act of the principal. Section 2 (a) of the Indian Partnership Act (Act 1X of 1932) defines an act of a firm to mean "any act or omission by all the partners, or by any partner or agent of the firm which gives rise to a right enforceable by or against the firm. The effect of this section read with the Explanation to S. 6 of the Act appears to be that the question whether an act of insolvency of one or more partners can be regarded as an act of all the partners is a question of fact to be determined on the facts and circumstances of each particular caseIn the present ease, the property of which Mukund Lal made a gift to Veer Kumar was not partnership property and there was no collective act of insolvency alleged on behalf of all the partners of the firm. In the circumstances of the present case it cannot also be held that the act of insolvency committed by Mukund Lal should be attributed to Ram Surat Misra. The High Court has, in fact, allowed the appeal of Ram Surat Misra and set aside the order of the lower courts declaring him as insolvent.We arc consequently of opinion that the order of the lower courts, so far as it adjudicates the registered firm as insolvent, should be set aside, but the rest of the order of the lower courts declaring Mukund Lal as insolvent will stand.