2006 (4) TMI 573 - HC - Indian Laws

Summary

Issues Involved:
1. Jurisdiction of the Court to issue an insolvency notice based on a recovery certificate issued by the Debt Recovery Tribunal (DRT).
2. Definition and interpretation of "decree" or "order" under Section 9(2) of the Presidency-Towns Insolvency Act, 1909.
3. Whether the Debt Recovery Tribunal's recovery certificate qualifies as an executable order under the Insolvency Act.
4. The exclusivity of the Debt Recovery Tribunal's jurisdiction under the RDDB Act.
5. Nature of insolvency proceedings as in rem or in personam.

Analysis:

1. Jurisdiction of the Court to Issue Insolvency Notice:
The judgment debtor argued that the Court lacks the power to issue an insolvency notice under Section 9(2) of the Insolvency Act based on a recovery certificate issued by the DRT. The judgment debtor contended that the jurisdiction of the DRT is exclusive, and the execution of the recovery certificate can only be done under the RDDB Act. Additionally, it was argued that there is no provision under the Insolvency Act to issue an insolvency notice based on a recovery certificate from the DRT.

2. Definition and Interpretation of "Decree" or "Order":
The judgment debtor's counsel argued that an insolvency notice could only be issued based on a "decree" or "order" for payment of money as contemplated by Section 9(2) of the Insolvency Act. It was contended that a recovery certificate issued by the DRT does not qualify as a "decree" or "order" under the Civil Procedure Code (CPC). The counsel relied on Sections 2(2) and 2(14) of the CPC, which define "decree" and "order" respectively, to argue that these terms refer to adjudications made by a civil court.

3. Executability of the DRT's Recovery Certificate:
The judgment debtor alternatively argued that Section 9 presupposes an executable order for payment. Since the DRT's order is not executable but only the recovery certificate is, it was contended that there is no executable order to satisfy the requirements of Section 9(2) of the Insolvency Act. The counsel also argued that the RDDB Act is a complete code, and Section 34 of the RDDB Act provides overriding jurisdiction to the DRT, precluding the issuance of an insolvency notice by the Court.

4. Exclusivity of the DRT's Jurisdiction:
The judgment debtor's counsel relied on the Supreme Court's judgment in Allahabad Bank v. Canara Bank, which held that the DRT has exclusive jurisdiction for recovery and execution under the RDDB Act. The counsel argued that the Insolvency Act's provisions should not apply, and the only remedy available to the bank is to execute the recovery certificate under Section 25 of the RDDB Act.

5. Nature of Insolvency Proceedings:
The judgment creditor's counsel argued that insolvency proceedings are in rem and benefit all creditors, not just an individual creditor. It was contended that the words "decree or order" in Section 9(2) of the Insolvency Act are not qualified by the words "of any Court," implying that an order or decree from any authority, including the DRT, could be the basis for an insolvency notice.

Judgment:

1. Jurisdiction and Interpretation of "Decree" or "Order":
The Court held that the words "decree or order" in Section 9(2) of the Insolvency Act are not limited to decrees or orders of civil courts. The absence of the words "of any Court" in Section 9(2) indicates that the legislature intended a broader interpretation. The Court noted that the legislature consciously omitted these words, as they are present in Sections 9(1)(e) and 9(1)(h) of the Insolvency Act.

2. Executability of the DRT's Recovery Certificate:
The Court rejected the argument that the recovery certificate is not an executable order. It held that the issuance of a recovery certificate is a procedural requirement for executing the DRT's order. The DRT's order adjudicates the liability and directs payment, making it an executable order under Section 9(2) of the Insolvency Act.

3. Exclusivity of the DRT's Jurisdiction:
The Court distinguished the present case from the Allahabad Bank judgment, noting that insolvency proceedings are in rem and not controlled by individual recovery proceedings under the RDDB Act. The Court held that the Insolvency Act provides an additional remedy and does not derogate the DRT's power to execute recovery certificates.

4. Nature of Insolvency Proceedings:
The Court emphasized that insolvency proceedings are in rem, benefiting all creditors. It held that the provisions of Section 9(2) of the Insolvency Act should be given the widest possible interpretation to include all adjudicated recoveries that have achieved finality.

Conclusion:
The Court dismissed the notice of motion and upheld the issuance of the insolvency notice. The judgment debtor's arguments were found to be without merit, and the insolvency notice was made absolute. The Court reiterated that insolvency proceedings are in rem and serve the interests of all creditors, not just individual claims.