Demand deposits and execution sale as act of insolvency sustained adjudication against the firm and its partner

Deposits of a banking character payable on demand were treated as becoming enforceable only on demand, so limitation began when demand was made and the claims were not barred. An insolvency petition was maintainable where the debt had crystallised into a liquidated sum, even though repayment was linked to a determinable future time. Sale of the firm's immovable property in execution of a money decree within the prescribed period constituted an act of insolvency. The widow of a deceased partner was found to remain a partner on the evidence and could be adjudged insolvent on that basis.

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Issues: (i) whether the creditors' claims for return of deposits were barred by limitation or became enforceable only on demand under the law governing deposits payable on demand; (ii) whether the insolvency petition was premature because some deposits were payable at a future time; (iii) whether the sale of the firm's immovable property in execution of a decree within three months before the petition constituted an act of insolvency; and (iv) whether the widow of a deceased partner could be adjudged insolvent as a partner of the firm.

Issue (i): whether the creditors' claims for return of deposits were barred by limitation or became enforceable only on demand under the law governing deposits payable on demand.

Analysis: The deposits were held to be transactions in the nature of deposits payable on demand rather than mere loans. The receipts and pass books, the banking character of the firm, and the requirement of notice and return of the instruments showed that repayment was not immediately exigible on expiry of the fixed term, but remained dependent on demand. In such a case limitation begins when demand is made. The court also treated the acknowledgments as supporting, though not essential to, the enforceability of the claims, but the decisive point was the applicability of the rule governing deposits repayable on demand.

Conclusion: The claims were held to be within limitation and not barred.

Issue (ii): whether the insolvency petition was premature because some deposits were payable at a future time.

Analysis: The debt had crystallised into a liquidated sum after demand. A petition in insolvency may be founded on a debt payable either immediately or at a certain future time. The stipulation that repayment would follow after a stated period from the termination of an earlier insolvency did not defeat the maintainability of the petition, because the debt was ascertained and payable at a determinable future date. The statutory requirement was satisfied once the debt was shown to be liquidated and recoverable in law.

Conclusion: The petition was not premature.

Issue (iii): whether the sale of the firm's immovable property in execution of a decree within three months before the petition constituted an act of insolvency.

Analysis: The firm's property had been sold in execution of a money decree and the sale was confirmed shortly before presentation of the insolvency petition. Under the insolvency statute, sale of property in execution of a decree for money is an act of insolvency, and the petition must be based on an act occurring within the prescribed three-month period. The evidence showed that this requirement was satisfied. The appellants also failed to establish that they were able to pay their debts, and the existence of some assets did not negate the statutory act of insolvency on the proved facts.

Conclusion: The execution sale constituted an act of insolvency within the statutory period.

Issue (iv): whether the widow of a deceased partner could be adjudged insolvent as a partner of the firm.

Analysis: The materials showed that after the death of the original partner, the widow had been taken into the reconstituted firm as a partner. The alleged relinquishment of her interest was not supported by reliable evidence. On the partnership records and surrounding circumstances, her status as a partner continued to be established.

Conclusion: She could validly be adjudged insolvent as a partner.

Final Conclusion: The statutory conditions for adjudication were satisfied, including a proved act of insolvency, maintainability of the petition, and liability of the relevant partners, so the adjudication was upheld.

Ratio Decidendi: A banking deposit payable on demand does not attract limitation until demand is made, and a money-decree execution sale of the debtor's property within the prescribed period constitutes an act of insolvency supporting adjudication where the debt is liquidated and the debtor is unable to pay.

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