|
ΠΑΓΚΥΠΡΙΟΣ ΔΙΚΗΓΟΡΙΚΟΣ ΣΥΛΛΟΓΟΣ
|
|
|
(V7) 1 CLR 91
1907 December 13
[91]
[TYSER, C.J. AND BERTRAM, J.]
IN RE PANAYI PIERI SHIRA.
BANKRUPTCY-DECLARATION OF BANKRUPTCY-COMMERCIAL CODE, ARTS. 147 AND 150-BANKRUPTCY RULES, 1894, RULES 1 AND 3-PROVISIONAL ADJUDICATION-"EXECUTED PROVISIONALLY"-Ex PARTE ORDER-CIVIL PROCEDURE LAW, 1885, SEC. 8.
A District Court has no power to make a provisional adjudication of bankruptcy.
The expression "executed provisionally" in Art. 150 of the Commercial Code explained.
An adjudication of bankruptcy may be made ex parte (subject to the provisions of Sec. 8 of the Civil Procedure Law, 1885), but it can only be made when there is such evidence as would be sufficient to support an adjudication after hearing both parties.
Per BERTRAM, J.: Evidence in support of a bankruptcy petition should be formal and precise.
Per TYSER, C.J.: It must show that there has been a cessation of commercial payments of such a character as to indicate an insolvent condition.
The evidence in support of a bankruptcy petition was that the debtor owed a creditor £16 and had other debts which he "could not or would not pay."
HELD: insufficient evidence of a. state of bankruptcy.
This was an appeal from an order of the District Court of Famagusta declaring PanayiPieriShira, of Lelkoniko, a bankrupt. The petition was dated October 3rd, 1907, and filed on the following day, when it was at once taken into consideration on an ex-parte motion made on behalf of the petitioning creditors.
Formal evidence of insolvency was given by one of the petitioning creditors, as follows:-
"I am a merchant. Panayi PieriShira is a, merchant carrying on business at Lefkoniko. He owes me about £16. He has many other debts and cannot or will not pay."
On his evidence the Court declared the debtor a bankrupt, and directed the Assistant Registrar to impound his books and papers, make an inventory of his property and debts, set seals on his property and report to the Court.
It appeared further from the file of the proceedings that the hearing of the petition was fixed for October 22nd.
The debtor appealed.
G. Chacalli for the Appellant.
Pascal Constantinides and Chrysaphinis for the Respondents.
Judgment: CHIEF JUSTICE: The order was in my opinion not justified on the evidence presented to the Court.
An order declaring a debtor bankrupt can be made ex parte, but it can only be made when there is such evidence as would be sufficient to support an adjudication after hearing both parties.
There must be facts proved which amount to a cessation of commercial payments by the debtor, i.e., to use the words of law "a state of bankruptcy."
Here the only evidence is that the debtor cannot or will not pay a debt of £16 due to a petitioning creditor and that he has many other debts which he cannot or will not pay.
This is quite consistent with his being in a perfectly solvent condition, and with a continuance on his part to pay debts and carry on his business in the ordinary way.
The Respondent seems to have thought that there could be an interim adjudication pending enquiry as to whether the debtor was bankrupt or not.
In my opinion this is not so. The Respondent seems to have misunderstood the term "executed provisionally" in Sec. 150. It does not mean adjudication till hearing, but immediate execution after adjudication and it enables the Court to give immediate effect to the adjudication although it has been made ex parte.
The order must be set aside and the case sent down to the District Court to fix a new day for hearing the petition.-Costs of appeal and of the proceedings below to be in the discretion of the District Court on the hearing of the petition.
This Order is made without prejudice to any application which the creditor may think fit to make to the Court below ex parte.
BERTRAM, J.: It is not clear on the face of the proceedings whether the order of adjudication in this case was intended as a final order made ex parte, or, as suggested by the Respondents, as an interim order with a view to the preservation of the debtor's property pending the hearing of the bankruptcy petition.
In any case it was not justified by the evidence presented to the Court.
In order to justify an adjudication of bankruptcy, it must be shown that the debtor has suspended his commercial payments. See in re Haji Fehmi Hassan (1892) 2 C.L.R., 87. Here the evidence merely states that the debtor owed the petitioner £16 and had other debts which he "could not or would not pay." There is nothing to show that these debts arc commercial debts, and for anything that appears to the contrary they may be claims disputed by the debtor.
A petition in bankruptcy is a semi criminal proceeding. Adjudication involves very serious consequences for the debtor-stoppage of his business, sequestration of his property and personal arrest (Art. 165), and in certain events may even lead to imprisonment (Art. 288 and Penal Code, Art. 232). The evidence in support of the petition should therefore be formal and precise.
An adjudication may no doubt be made ex parte. Power is reserved to the Court by Rule 3 of the Bankruptcy Rules, 1894, to direct that the service of the petition on the debtor may be dispensed with. This is entirely in accordance with the system of the French Commercial Code, which the Ottoman Code closely follows. See Lyon-Caen and Rénault: Traité de Droit Commercial, Vol. VII, Sec. 99. Such a case would however be governed by Sec. 8 of the Civil Procedure Law, 1885, and, even if the evidence given in this case warranted an adjudication, the conditions of that section have not been complied with.
The Respondents, however, preferred to support the order as a provisional one. They contended that the law had been exactly complied with; that Rule 1 of the Bankruptcy Rules, 1894, requires the petitioner to ask first that the Court shall declare the debtor a bankrupt, and secondly, that it shall fix a day for the hearing of the petition. It was contended that the two matters were to be dealt with in this order-that the debtor was to be adjudicated bankrupt provisionally, and that afterwards the petition was to be heard. This argument seems to me untenable. It does not follow that because the law says that two things are to be asked for in a particular order that they must be dealt with in that order. The law knows nothing of a provisional adjudication of bankruptcy. The question to be determined on the hearing of the petition is whether the debtor is to be adjudicated bankrupt or not, and it is impossible to suppose that he is to be adjudicated bankrupt first and the matter tried out afterwards.
The expression in Art. 150, which is translated in Mr. Amirayan's edition "executed provisionally" does not support the Respondent'scontention. It corresponds to the words "executoireprovisoirement in the corresponding article of the French Code (440). In French Procedure the words have a technical significance, and their effect here (assuming that the Turkish expression is to be interpreted in the same sense) is that an adjudication of bankruptcy is put into operation at once, in spite of either "opposition" or appeal. Otherwise under Art. 71 of the Code of Commercial Procedure, it would, if made. ex parte, be delayed till 15 days after signification, and in the event of" opposition " or appeal would be suspended (Arts. 78 and 109). See Lyon-Caen and Rénault: Traite de Droit Commercial, Vol. VII, Sec. 125. Rogron, Code de Commerce Explique, 4th Edition, 782.
In any event, as pointed out above, the evidence is not such as to justify even a provisional adjudication, even supposing that the law recognised such a proceeding.
Appeal allowed.