A creditor’s insolvency petition requires a statutory act of insolvency, not mere nonpayment or attempted alienation.

Respondents 1–9 presented I.P. No. 4 of 2016 seeking to have the appellant and respondents 10–14 adjudged insolvent.

Although it was a creditor’s petition, it had been filed under Section 10 of the Provincial Insolvency Act, 1920; the High Court treated it as one under Section 9(1), holding that the incorrect statutory reference did not by itself make the petition unmaintainable.

The trial court allowed the petition and directed the sale of the scheduled properties, with repayment from the proceeds.

On appeal, the creditors’ counsel identified the debtor’s alleged attempt to alienate property as the act of insolvency.

Whether a creditor’s petition under Section 9(1) of the Provincial Insolvency Act, 1920, can proceed without proof that the debtor committed an act of insolvency specified in Section 6.

Whether an attempt to transfer property, or failure to repay a debt, constitutes an act of insolvency under Section 6.

Whether the impugned order could be set aside only as against the appellant, leaving it in force against respondents 10–14.

Section 9(1) of the Provincial Insolvency Act, 1920, permits a creditor’s petition only when its stated conditions are met, including that an act of insolvency occurred within the prescribed three-month period; the conjunctive wording makes those conditions mandatory.

Section 6 defines the acts of insolvency, including specified transfers of property, but requires a transfer—not merely an attempt to transfer—for the relevant transfer-based grounds.

In Vadamala Sanjeevi Reddy v. K. Ellappa Reddy, 1966 SCC OnLine AP 9, the court held that Section 6(b) concerns a transfer made with intent to defeat or delay creditors; in Chellathurai Nadar v. Ramaswami Pillai, 1995 SCC OnLine Mad 260, it was held that an agreement for sale alone is insufficient.

An attempted transfer may support an application for attachment before judgment under Order 38 CPC, but is not, by itself, an act of insolvency under Section 6.

Failure to repay may found a money suit but does not, without a statutory act of insolvency, support a creditor’s insolvency petition.

The court accepted that the petition could be treated as having been filed under Section 9 despite its reference to Section 10, but held that the creditors still had to satisfy Section 9’s mandatory conditions.

The creditors relied on an alleged attempt to alienate property; because Section 6(a)–(c) require that a transfer be made, that allegation did not establish an act of insolvency.

Nor did the appellant’s admitted borrowing and failure to repay meet that requirement: those facts could support a money claim, but not insolvency proceedings absent an act listed in Section 6.

Since the petition was incompetent, the court rejected the suggestion that relief should be limited to the appellant.

The impugned order was set aside in its entirety, including as against respondents 10–14; the creditors remained at liberty to pursue any other remedy available in law.

No costs were ordered, and the connected miscellaneous petition was closed.