1988 Supreme(Bom) 219

IN THE HIGH COURT OF BOMBAY
H. Suresh, J.
Re : Bharat Chandulal Nanavati another ..... Debtors.
Versus
United Commercial Bank, Bombay-23 ..... Petitioning Creditors.
In insolvency Petition No. 40 of 1987, decided on 11-7-1988.
Advocates appeared :
S.H. Doctor with R.S. Daruwalla i/b. Kanga Co., for petitioning creditors.
A.C. Shah with Mrs. R. Milwalla i/b. Matubhai Jamietram, for debtors.

Headnote:INSOLVENCY ACT. 1909

       Sections 10, 12, 13 - Limitation Act 1963, Section 12 - Rules of High court of Bombay on the original side as existed prior to May 10, 1980, Rules 3l6 - Ex parte money decree in favour of creditor - Decree sealed on 12 - 7 - 1976 - Exertion of - Insolvency notice - After Service of - Required to be discharged by judgment debtor within prescribed time in notice - Failure of J. D. therein Commits an act of insolvency on expiry of period mentioned insolvency notice if Judgment creditor files a petition under Section 10 read with Section 12, he becomes entitled to order an adjudication – Limitation-Rule 326 of Original side Rules mandatory - Time starts after sealing of decree.

       After the service of the insolvency notice it is for judgment debtor to make an application for discharge of the notice within the time prescribed in notice. It is in that notice he has to make out a case as to why the decree is not executable. It is at that stage the Court has to consider whether the decree is not executable for any reason, under any law, including the question of limitation if any. If the judgment - debtor fails to make any such application or fails to have the said notice set aside, it must necessarily beheld the debtor did commit an act of insolvency on the expiry of the period mentioned in the Insolvency Notice and if the judgment creditor fils a petition under Section 10 read with Section 12 of the Act, he become entitled to an order of adjudication in the ordinary course. In such a case there is no question of such a creditor proving any debt or any act of insolvency as required under Section 13 (2) of the Act, inasmuch as the decree itself is the proof of debt and the failure on the part of the debtor in having the Insolvency Notice set aside, is the proof of the act of insolvency. There can be no further enquiry under Section 13 of the Act whether the decree is executable or not at the time of hearing of such a petition or at the time of passing an order of adjudication the question whether a decree is executable or not is relevant in an application made by the debtor to have the Insolvency notice set aside. But not so, at the hearing of the petition or at the time passing of an order of adjudication.

       The scheme of the law of Insolvency is such that once an order of adjudication is made, it relates back to the date of commission an act insolvency. In such a case, time ceases to run as from that date. It is at that date the property of the insolvency vests in the Official Assignee. As from that date the Indian Limitation Act has no application and the relationship of debtor and creditor ceases to exist. that why under Section 13 (8) of the Act, a creditor having presented a petition on commission of Court Since the act of insolvency on which the petition is grounded has occured within three months before the presentation of the petition, the petition as from the date of its presentation is for the benefit of the general class of creditors and not for and on behalf of the petitioning creditor alone.

       It is could be said that the Rule 326 of the Original Side Rules, as it existed then, is a mandatory rule and without which no execution is possible then the time can only begin to run after the decree is so sealed. This has nothing to do with the explanation as contemplated under Section 12 of the Limitation Act, 1963 the explanation was introduced in order to finally put the lid on the controversy with regard to the time requisite for obtaining a certified copy of the decree under Section 12 (2) of the Act. The explanation made it clear that the delay in the office of the Court in drawing up the decree or order before the application for a copy thereof is made, shall not be excluded that may be relevant for the purpose of obtaining a certified copy of the decree But for the execution of a decree if there is condition precedent, time can not run prior thereto. The Calcutta High Court said that the rule was mandatory.

       PRESIDENCY TOWNS INSOLVENCY ACT, 1909

       Section 13-Execution of money decree-Insolvency application-Insolvency notice-Debtors failing to get the notice set aside-Debtor committed act of insolvency on expiry of notice period-Creditor filed petition under Sections 10 and 12-Creditor entitled for adjudication order.

       In such a case there is no question of such a creditor proving any debt or any act of insolvency as required under Section 13 (2) of the Act, inasmuch as the decree itself is the proof of debt and the failure on the part of the debtor in having the Insolvency Notice set aside, is the proof of the act of insolvency. There can be no further enquiry under Section 13 of the Act whether the decree is executable or not at the time of hearing of such a petition or at the time of passing an order of adjudication. The question whether a decree is executable or not is relevant in an application made by the debtor to have the Insolvency notice set aside. But not so at the hearing of the petition or at the time passing of an order of adjudication.