9911796707
TMI Blog1992 (9) TMI 366X X X X Extracts X X X X X X X X Extracts X X X X ..... Krimpex Synthetics Ltd. The Industrial Credit and Investment Corporation of India Ltd. and Industrial Finance Corporation of India have filed Suit No. 1595 of 1989 in this Court for a declaration that a sum of ₹ 1,11,30,538/- is due and payable by the said M/s. Krimpex Synthetics Ltd., to the plaintiffs alongwith further interest till payment and/or realisation and for various other reliefs. In this suit, the creditors-plaintiffs have admitted that M/s. Krimpex Synthetics Ltd., have created mortgage, charge and hypothecation over its various immovable and moveables assets to secure the loans advanced by the plaintiffs to the said company. By the said suit, the plaintiffs seek to enforce the securities furnished by M/s. Krimpex Synthetics Ltd. On 20th March 1987, Sarvashri Sharad R. Khanna (Chairman and Managing Director of the Company) and Sumesh Khanna (Director of the said Company) executed a joint and several Deed of personal guarantee in favour of the creditors to secure the various loans advanced by the creditors under the Common Loan agreement dated 18th March 1987. On 4th August 1987, Shri Ramanlal Khanna executed a document of personal guarantee in favour of the credi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iff No. 2 in the suit a sum of ₹ 86,93,667.54 with further interest on ₹ 73,98,866/- at the rate of 121/2% per annum from the date of the decree till payment or realisation and the cost of the suit as specified therein. By the said decree this Hon'ble Court directed the defendants in the said suit to pay to both the plaintiffs jointly a further sum of ₹ 15,000/- as cost of the suit. The said decree has become final. At no time the execution of this decree has been stayed by any Court. Since the decretal amount was not paid, the decree holders i.e. the Industrial Credit and Investment Corporation of India Ltd. and Industrial Finance Corporation of India moved the Insolvency Registrar to issue the Insolvency notice as permissible under Presidency Towns Insolvency Act. On 27th August 1991, the Insolvency Registrar issued a notice (being Insolvency Notice No. N/108 of 1991) to all the three debtors (1) Shri Sharad, Shri Sumesh and Shri Ramanlal R. Khanna, calling upon the three debtors to pay the decretal amount to the two decree holders within the time stipulated therein. Particulars of claim appended to the said Insolvency notice show that the debtors were requi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yment and that furnished to you forthwith as company failing to make payment. Yours faithfully Sd/- Sharad Khanna Sd/- Sumesh Khanna Sd/- Ramanlal Khanna. 3. The Debtors failed and neglected to comply with the insolvency notice. The Debtors took out two notices of motion herein seeking to set aside the above referred insolvency notice. 4. Before 1 discuss the rival contentions urged by the learned Counsel on both sides at the hearing of this notice of motion, it is necessary to notice the relevant provisions of the Presidency-Towns Insolvency Act, 1909 (Act 3 of 1909) and the relevant rules known as The Bombay Insolvency Rules, 1910 and summarise some of the well settled propositions of law. 5. Section 9 of The Presidency Towns Insolvency Act, 1909 enumerate acts of Insolvency which may be committed by the debtor. Section 9(i) was inserted in the said Act by Bombay Act XV of 1939 providing for non-compliance with an Insolvency notice as an additional act of Insolvency which could form the basis of a judgment creditor's petition for adjudication of judgment debtor concerned as an Insolvent. Simultaneously section 9-A was inserted in the said Act by Bombay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Act. By section 9(2) of the Act, a provision was made to the effect that a debtor commits an act of Insolvency if a creditor, who has obtained a decree or order against him for the payment of money (of which the execution was not stayed) has served on him a notice referred to therein as the Insolvency notice and the debtor does not comply with such notice within the period specified therein. Section 9(2), section 9(3) and section 9(4) of the said Act are more or less identical with the provisions contained in section 9(1)(i) and 9-A of the said Act incorporated in Presidency-Towns Insolvency Act, 1909 r/w Rules 52-A and Rule 52-A(1) to Rule 52-B(4) of The Bombay Insolvency Rules, 1910. The grounds on which the Insolvency notice may be set aside are now specified in section 9(5) of the said Act. The grounds available to the debtors in support of an application for setting aside of insolvency notice as specified in section 9(5) of the Act are not identical with the grounds specified in Rule 52-B(5) of Bombay Insolvency Rules, 1910. It is obvious to me that after coming into force of Act No. 28 of 1978, an Insolvency notice can be set aside only on the grounds specified in sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee as recognised by the Privy Council as more particularly setout in the statement of objects and reasons concerning the above referred Amending Act. 8. It is well settled law that the Insolvency Court at the stage of deciding the notice of motion for setting aside the Insolvency notice cannot go behind the decree on which the Insolvency notice is based and the power of Insolvency Court at this stage is confined to determining whether any amount is due under the decree to the judgment creditors. It was held by the Division Bench of this Court presided over the Hon'ble Chief Justice Shri M.C. Chagla and the Hon'ble Mr. Justice S.T. Desai in the case of J.P. Tiwari v. Bhimraj Harlalka , 1960 Bom. L.R. 963, that the judgment debtor cannot seek de novo trial of the suit in which the decree was passed at the stage of hearing of the Insolvency notice and the Insolvency cannot be set aside on the ground that the decree was not validly or properly passed against the debtors. 9. One more aspect shall have to be borne in the mind while considering and examining the contentions urged by the learned Counsel on either side. On this aspect also, propositions of law are well settle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... faction of the creditor. The learned Counsel for the debtors has submitted that this provision contained in section 9(3)(c) of the Presidency-Towns Insolvency Act, 1909 provides a clue and justification for his submission that no Insolvency notice can be taken out by the decree holder-creditor if the decree-holder creditor already holds adequate security for payment of the debt whether such security is provided by the Judgment debtor under the decree or someone else. This argument appeared to me at the first blush to be attractive. However, I have found no merit in this submission on proper scrutiny thereof. It is not the case of the judgment debtors have furnished any security for the payment of decretal debt after service of the Insolvency notice to the satisfaction of the creditors or their agent within the contemplation of section 9(3)(c) of the Act or otherwise. The question to be asked is as to whether holding of securities from Krimpex Synthetics Ltd., precluded the judgment creditors from invoking the provisions contained in section 9(2) of the Act providing for issue of an insolvency notice as a matter of course if the execution of the decree is not stayed by the Court. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Creditor as provided in section 2(1)(e) of the Provincial Insolvency Act would apply also to the cases covered under the Presidency-Towns Insolvency Act and decree holder in that case could not be treated as secured creditor for the purpose of Presidency-Towns Insolvency Act. S.K. Mukherjee, J., speaking for the Hon'ble Division Bench referred to and relied on the Division Bench judgment of our High Court in the case of Krishna Chinoo Sons v. Marubhai Kasanbhai , I.L.R. 53 Bom. 290, wherein it was held that the definition of secured creditor in the Provincial Insolvency Act was valid also for the purpose of the Presidency Towns Insolvency Act. In this case, the decree holders do not hold any security over any property of the judgment debtors or either of them. Thus the creditors herein cannot be treated as secured creditors for purpose of proceedings under Insolvency law as the creditors do not hold any mortgage, charge or lien over any of the debtors herein or any part thereof as a security for the debt due to creditor from the judgment debtors herein. 14. It appears to be useful to refer to the definition of the expression secured creditor as appearing in section 16 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... debtor at all. What they held was security from someone who was jointly and severally liable with the debtor for the amount set out in the interim certificate dated October 24, 1980. (The underlining is done to supply emphasis) The Court of Appeal also relied on passages from the Standard Work of Williams and Muir Hunter on bankruptcy 19th ed. (1979) p 512 summarising the law on the subject. In other words the judgment debtor cannot resist the Insolvency proceedings on the ground that the creditor holds security on the property of a third party. Who may be jointly and severally liable for the debt. 16. The learned Counsel for the debtors submitted that the above referred definition of 'Secured Creditors' and the relevant principles would be applicable only at the stage when the Court was considering and deciding the petition for adjudication of the debtor as an insolvent under section 12(2) of the Act. The learned Counsel for the debtors has contended that the above referred principles are not applicable at the stage when the Court is considering the notice of motion taken out by the debtors for setting aside of Insolvency Notice. I have reflected over this submissio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of Division Bench of our High Court in the case of Bharat Chandulal Nanavati v. United Commercial Bank , is directly on the point. It is of considerable significance that the submissions of learned Counsel for debtors run counter to the very definition 'Secured Creditor' as set out in section 2(e) of Provincial Insolvency Act, 1920 which definition is duly adopted for the purpose of Presidency Town Insolvency Act, 1909 as well by judicial decision of this High Court as well as High Court of Calcutta. 19. The learned Counsel for the debtor has invited attention of the Court to the judgment of the Hon'ble Supreme Court in the case of Harinagar Sugar Mills Company Ltd. v. Court Receiver , High Court, Bombay, [1966]60ITR508(SC). In this case, the Court Receiver was duly empowered to take all necessary steps and proceedings for the realisation of the property and the debts due to the joint family. In this context the Apex Court was called upon to consider as to whether the Court Receiver had a locus standi to file a petition for winding up of the debtor company. Subbarao, J., speaking for the Bench of the Hon'ble Supreme Court approved the dictum of law deduced ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unsel for the debtors relied upon the judgment of the Court of Appeal in the case of In Re Low Ex parte The Argentine Gold Fields Ltd., (1890)1 Q.B.D 147. The learned Counsel invited the attention of the Court to the provisions of the decree dated 5th November 1990 and submitted that the decree in question stipulated separate independent liability of the judgment debtors for different amounts payable to plaintiff No. 1 and plaintiff No. 2. The learned Counsel submitted that this was not a case of joint indivisible decree in favour of the two decree holders. In the above referred judgment cited by the learned Counsel for the debtors, the decree holder had made an application to the Registrar for issue of composite Insolvency notice in respect of two judgment debts obtained by the decree-holder in two separate actions. The Insolvency Registrar had declined to issue single composite Insolvency notice in respect of two judgment debts obtained by the applicant in two separate action but offered to issue separate notice for each of the judgment debt. The action of the Registrar was upheld by the Court of Appeal. The ratio of this judgment was followed by the Court of Appeal in another ju ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
