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TMI Blog2006 (4) TMI 573X X X X Extracts X X X X X X X X Extracts X X X X ..... ment dated 8.1.2003. The judgment creditor has on the basis of the said order and judgment of the Debt Recovery Tribunal and consequent recovery certificate issued to them made an application to this Court under Section 9 of the Presidency-Towns Insolvency Act, 1909 (hereinafter referred to as the Insolvency Act ) on the ground that by virtue of non-payment of the amount awarded by the Debt Recovery Tribunal by an order and judgment dated 8.1.2003 the debtor has committed an act of insolvency. The said application has been made in accordance with the provisions of sub-section (2) of Section 9 of the Insolvency Act. Pursuant to the said application, the Insolvency Registrar has issued an insolvency notice on 8.10.2004. On 9.10.2004 the said notice is duly served on the judgment debtor. On 13.12.2004 the present application has been initiated by the judgment debtor for setting aside the insolvency notice. 3. In support of the application for setting aside the insolvency notice it has been contended that issuance of the notice is bad in law in as much as the Court has no power to issue insolvency notice under section 9(2) of the Insolvency Act on the basis of the recovery certific ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the words decree or order as contemplated under sub-section (2) of Section 9 of the Insolvency Act and, therefore, also the insolvency notice is liable to be set aside. In further alternative to the aforesaid two submissions the learned counsel for the judgment debtor has submitted that the provisions of the Debt Recovery Tribunal is a complete code by itself. He has further relief upon the provision of section 34 of the RDDB Act and by relying upon the said section it has been contended that section 34 of the RDDB Act provides an overriding effect and thus confers a exclusive jurisdiction on the Debt Recovery Tribunal for taking all steps once an application is made for recovery of the amount and thus the recovery and/or execution of the certificate also has to be in accordance with the provisions of section 25 of the RDDB Act and no notice under section 9(2) of the Insolvency Act can be issued by this Court. In support of the aforesaid contention, the learned counsel has relied upon a series of judgments commencing from the judgment of Diwan Brothers v. Central Bank of India and others reported in AIR 1976 SC 1503 and particularly he has relied upon paras 19 and 20 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... record and marked'X' for identification. Undertakings contained in paras 3, 4 and 10 of the consent terms are accepted. (3) In view of the above, contempt petition is disposed of in terms of the consent terms at 'X'. The question is whether such an order passed on the consent terms passed in Contempt proceedings can be regarded as an order within the meaning of term as given in section 2(14) of the Civil Procedure Code. Shri Bulchandani referred to the definition of the term Order and pointed out that there are 3 requisites which make an order within the meaning of section 2(14) of the Civil Procedure Code and they are (1) It must be formal expression, (2) such expression must be of a decision and (3) it must be of Civil Court. Shri Bulchandani further submitted that the High Court is not Civil Court but it is a Court of record as it is constituted under the Constitution. In this respect he relied upon a decision in State of U.P. v. Mukhtar Singh AIR 1957 All 505, wherein it was held that a final order within the meaning of Order 45, Rule 1 must be an order as defined in section 2(14) of the Code, i.e. it must be a formal expression of a decision of a Civil Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Procedure Code has been overruled by the Division Bench judgment in the case of Re: Dhirendra Bhanu Sanghvi .. Judgment debtor Ex parte ICDS Limited .. Judgment Creditor reported in 2003 (5) Bom CR 161. However, the learned counsel for the judgement debtor has contended that he is relying upon the said judgment for the proposition of law namely, that when the order is passed in terms of consent terms then it does not amount to an order or a decree as contemplated under section 2(2) and 2(14) of the CPC. He has thereafter relied upon the judgment of the Apex Court in the case of Allahabad Bank v. Canara Bank and Anr. reported in AIR 2000 SC 1535. This judgment has been relied upon by the learned counsel for the judgment debtor in support of his alternative contention that in view of the provisions of the RDDB Act being a complete Code by itself and further in view of the fact that section 34 of the RDDB Act gives an overriding jurisdiction, the provisions of Section 9(2) of the CPC cannot apply and the only remedy of the bank being the judgment creditor is to execute the recovery certificate under Section 25 of the Said RDDB Act. In support of the aforesaid contention he has relied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... adjudication of the liability but also in regard to the execution proceedings. It stated in Annexure XI of the Report that all execution proceedings must be taken up only by the Special Tribunal under the Act. In our opinion, in view of the special procedure for recovery prescribed in Chapter V of the Act, and section 34, execution of the certificate is also within the exclusive jurisdiction of the Recovery Officer. 7. On the other hand, the learned counsel appearing for the respondent has contended that firstly it is require to be borne in mind that the jurisdiction of the insolvency Court is not for recovery of any claim of any one individual but it is an important remedy in rem rather than in personam. It has been contended that it is now well settled that insolvency proceedings are in rem and being for benefits of creditors at large and not for recovery of an individual claim of an individual creditor. Secondly it has been contended by the learned counsel for the judgment creditor that the contentions raised by the judgment debtor relying upon sub section (2) of section 9 are erroneous. It has been brought to my notice that the words which are appearing in sub-section (2) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... adjudication of the dispute between the parties. The Debt Recovery Tribunal passes an order for issuance of a recovery certificate after adjudicating the dispute between the parties. Once such an order is passed then issuance of a recovery certificate is a mere formality for the purpose of initiating an execution proceedings. Even the liability of the judgment-debtor stands determined by virtue of the fact that such an order is passed under the provisions of Section 19 of the RDDB Act. It has been further submitted that while construing the provisions of sub section (2) of Section 9 of the Insolvency Act, this Court must take into consideration the purpose and object of enactment of the said Act. It has been submitted that the purpose and object of the enactment of the said Act is an expeditious recovery of money of the various creditors and similarly is the object for the purpose of enactment of the RDDB Act. It has been thus submitted that the provisions of sub-section (2) of Section 9 must not be in derogation of the power of the Debt Recovery Tribunal to recover the amount by execution of a recovery certificate but should be read in addition thereto. And thus it is submitted t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ditors. This is because the same act of insolvency is available to all his creditors. By satisfying one of the creditors the act of insolvency is not erased unless all creditors are satisfied because till all creditors are paid the debtor must prove his ability to meet his liabilities. In this case the petitioning creditors had their own decrees. It was in the decree of another creditor that the payment was made but only after the act of insolvency was committed. Besides the petitioning creditors there were several other creditors to whom the appellant owed large sums of money and his total debts aggregated to Rs. two lakhs. It is plain that any of the remaining creditors, including the petitioning creditors, could rely upon the act of insolvency even though one or more creditors might have been paid in full. The act of insolvency which the appellant had committed thus remained and was not purged by payment of decretal amount after the sale in execution of the money decree. 10. Thereafter he has relied upon the judgment of the Division Bench of this Court in the case of Bharat Chandulal Nanavati and Anr. v. UCO Bank and Anr. reported in AIR 1992 Bom 170, particularly the portion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he High Court, in our opinion was right in rejecting the application. The Supreme Court while dealing with the arbitration proceedings vice versa winding up proceedings under the Companies Act has come to the conclusion that the proceedings of winding up is a proceeding in rem and not for the recovery of any debt and it has been held that such a proceeding in rem cannot be excluded or barred by virtue of the provisions of Arbitration Act which is a code by itself. The learned counsel for the judgment debtor has thereafter contended that a similar issue arose before this Court but while determining whether insolvency notice under sub-section (2) of Section 9 can be issued in respect of an award. The similar argument was advanced that the award is neither order nor decree of this Court as defined under section 2(2) and 2(14) of the CPC. He further pointed out that the judgment relied upon by the learned counsel for the judgment debtor in the case of Re Siddharth Srivastava (supra) had taken the view that since the award is not a decree as defined under section 2(2), the proceedings for insolvency is not maintainable. He also pointed out that another learned Single Judge has in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Supreme Court, an order had been passed by the Tribunal under the Displaced Persons (Debts Adjustment) Act,. 1951. Neither the Court Fees Act nor the Displaced Persons (Debts Adjustment) Act had defined the term decree . The Supreme Court held that the concept of a decree had been crystalised in Act No. VIII of 1859 passed by the Governor-General in Council and that consequently, when the Court Fees Act was enacted in 1870 and used the term decree , it must have intended to use the word decree so as to bear the same connotation as in the Act of 1859. Moreover, the Supreme Court noted that an order rejecting a plaint was mentioned as falling under the term decree both in the Code of Civil Procedure of 1882 and of 1908. Having regard to that definition, Schedule II, Article 11 of the Court Fees Act was amended so as to delete the words from an order rejecting the plaint for the reason that an order rejecting a plaint was incorporated in the expression decree and it was, therefore, not necessary to retain it in the Court Fees Act. In paragraph 10 of the judgment of Court Mr. Justice Fazal Ali, therefore, held that this was the most important intrinsic evidence to show th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se where a claim is adjudicated by any other authorities other than the Court of Law as contemplated under Section 2(2) and Section 2(14) of the CPC. I am also of the further opinion that the provisions of Section 9(2) must be given widest possible interpretation and meaning so as to include each and every kind of recoveries which are adjudicated and has achieved finality so as to enable the judgment creditor to effectively seek to recover his dues. Apart from the aforesaid, now it is well settled in the light of the judgements which are cited before me being in the case of Yeshvant Deorao v. Walchand Ramchand (supra), Yenumula Malludora v. Peruri Seetharathnam Ors. (supra) and Bharat Chandulal Nanavati and Anr. v. UCO Bank and Ors. (supra) that the provisions of the insolvency proceedings are in rem and not in personam. The provisions of the proceedings which are in rem are for the benefits of all creditors and is not for an individual creditor. In that view of the matter, it is not permissible to interpret the said provisions in a restrictive manner as sought to be suggested by the learned counsel for the judgment debtor and accordingly I reject the aforesaid contention. 12. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the RDDB Act. However, the contention is that the remedy under sub section (2) of Section 9 is an additional remedy than the remedy available under Section 25 of the Act. In my opinion, it is clear that the provisions of sub-section (2) of Section 9 of the Insolvency Act do not contemplate an execution of a decree in personam but it only is for the benefit of a creditor as a class and the action is in rem. Therefore the argument of the learned counsel for the judgment debtor must be rejected out right. The fact that it is a proceeding in rem is now well established by each of the various judgments which are already cited by me. Thus, once the proceeding is in rem then it cannot be controlled by individual proceedings of recovery of debt of each bank under the RDDB Act. The Apex Court in the case of Haryana Telecom Ltd. v. Sterlite Industries (India) Ltd. (supra) though in the context arbitration and winding up proceedings has taken a view that the proceedings in rem are not controlled by the individual recovery proceedings under the individual Act. In the present case the situation is identical. The proceeding under the insolvency is a proceeding in rem and such proceedings in rem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt. Clause (e), as already noted, dealt with the situation of an attachment of the property of a debtor in the execution of a decree of any Court for the payment of money. Clause (h) dealt with the imprisonment of the debtor in execution of the decree of any Court for the payment of money. When the legislature of the then State of Bombay enacted the Amending Act of 1939, the legislature had before it, the existing provisions of section 9, particularly Clauses (e) and (h) which expressly refer to a decree of any Court. Even so, a conscious departure was made while framing the language of the amendment in words which make a provision for the service of an insolvency notice in respect of a decree or an order for the payment of any amount due to the creditor. The legislature has advisedly not circumscribed the expression decree or order with the words of any Court . This aspect is fortified if a reference is made to sub-section (1) of section 9- A under which the debtor was entitled to move the Court upon the service of the insolvency notice explaining that his counter claim or set off which was at least equal to the decretal amount could not be lawfully set up in the suit or pr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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