1992 Supreme(Bom) 435

IN THE HIGH COURT OF BOMBAY
D.R. Dhanuka, J.
Sharad R. Khanna and others....Judgment Debtors.
Versus
Industrial Credit and Investment Corp. of India Ltd.
and others ...Judgment Creditors.
In Insolvency Notice of Motion No. 107 of 1991 in Notice No. N/108 of 1991, decided on 18-9-1992.
Advocates appeared :
Aspy Chinoy i/b Mehta Girdharilal, for applicant/judgment debtors.
J.I. Mehta with Y.B. Pandya i/b Pandya Poonawala, for judgment creditors.

Headnote:BOMBAY INSOLVENCY RULES, 1910

       Rule 52-B (5).

       See Presidency Towns Insolvency Act, 1909, Section 9 (5).

       Sections 132 and 140-Decree of Composite nature i. e. mortgage decree against debtor and personal decree against guarantor- Whether decree holder has right to execute decree against guarantor without first executing mortgage-decree against debtor-Held-Yes.

       Held, Even in a case where a composite decree is passed by the Court i. e. mortgage decree against the principal debtors as well as a personal decree against the guarantor, the decree-holder is entitled to execute the personal decree against the guarantors as a matter of right without first executing the mortgage decree. In another words the guarantor cannot insist on the decree-holder first realising the mortgaged security before the decree-holder can execute the decree against the guarantor personally. The guarantor could also be sued in law without the creditor being required to sue the principal debtor.

       PRESIDENCY TOWNS INSOLVENCY ACT, 1909

       Section 2 (g)-Expression "Secured Creditor"-Meaning of.

       Definition of expression secured creditor as provided under Provincial Insolvency Act, 1920 liable to be treated as valid for purpose of Presidency Town Insolvency Act as well.

       Section 9 (5) (as amended by Act, 28 of 1978)-Bombay Insolvency Rules, 1910-Rule 52-B (5)-Insolvency notice-Judgment-debtor seeking to set aside insolvency notice.

       Held, after coming into force of Amending Act, an insolvency notice can be set aside only on grounds specified in Section 9 (5). Rule 52-B (5) of Rules has no legal efficacy to the extent of inconsistency with provisions inserted in the Presidency Towns Insolvency Act, 1909 by Amending Act No. 28 of 1978.

       Sometime in the month of August 1978, and the Provincial Insolvency Act, 1920 were amended by the Insolvency Amending Act (Amendment) 1978 i.e. Act No 28 of 1978. By the said Amending Act, Section 9 (2) to Section 9 (5) were incorporated in Section 9 of 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-Town Insolvency Act, 1909 read with Rules 52-A and Rule 52-A (I) 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 that after coming into force of Act No. 28 of 1978, an Insolvency notice can be set aside only on the grounds specified in Section 9 (5) of the Act and no other ground.

       Rule 52-B (5) of the rules has no legal efficacy to the extent of inconsistency with the provisions inserted in the Presidency Towns Insolvency Act, 1909 by Act No. 28 of 1978.

       Section 9 (5)-Insolvency notice-Jurisdiction of Insolvency Court for setting aside of.

       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 i3 confined to determining whether any amount is due under the decree to the judgment-creditors. 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.

       Section 9 (5) and Section 12 (2) Insolvency notice-Setting aside of Position of secured creditor and principles involved regarding liability of debtors and guarantors.

       Whether different considerations would apply when petition under Section 9 (5) considered. Held, No.

       Issue of an Insolvency Notice is merely a step in aid of Insolvency proceedings for adjudication. Petition for adjudication of debtors are filed by the creditor on the debtor committing an act of insolvency. The two stages cannot be delinked altogether. The same definition of Secured Creditor shall have to be applied at both the stages. It is not possible to evolve and apply different definitions of Secured Creditor at the stage of considering the application to set aside insolvency notice. The petitioning creditor is admittedly not a secured creditor vis-a-vis the judgment-debtors herein.