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IN THE HIGH COURT OF BOMBAY
D.K. Deshmukh, J.
Hemant M. Nabar others.... Applicants.
Versus
Farohar Co. others.... Respondents.
In Insolvency Notice of Motion No. 79/99 in Notice of Motion No. N/63 of 1999, decided on 29-3-2001.
Insolvency Notice - Setting Aside - Presidency Towns Insolvency Act, 1909 - Section 9, Section 9-A, Rules 52-A, 52-B - The court considered the validity of an insolvency notice taken out by the decree holder under the provisions of the Presidency Towns Insolvency Act, 1909. The judgment debtor sought to set aside the notice on the ground that the decree pursuant to which the notice was taken out was not enforceable. The court analyzed the provisions of section 9, section 9-A, and Rules 52-A, 52-B, and held that an insolvency notice can be based only on an executable decree. The court also discussed the inherent powers of the High Court to prevent abuse of the process of the Court and set aside the insolvency notice when the foundation of the notice is found to be lacking. The court directed the matter to be placed before a larger Bench for further consideration.
Fact of the Case:
The Notice of Motion was taken out by the judgment debtors for setting aside the Insolvency Notice dated 30th August, 1999, taken out by the decree holder. The judgment debtors contended that the decree pursuant to which the Insolvency Notice was taken out is not enforceable, as the decree holder has not obtained the leave of the Court required under the provisions of Order 21, Rule 22 of the Civil Procedure Code for execution of the said decree.
Finding of the Court:
The Court found that an insolvency notice can be based only on an executable decree and that the provisions of section 9, section 9-A, and Rules 52-A, 52-B provide the grounds for challenging an insolvency notice. The Court also held that it has inherent powers to prevent abuse of the process of the Court and set aside the insolvency notice when the foundation of the notice is found to be lacking.
Issues: The issues involved in the case were the validity of the Insolvency Notice and the grounds for setting it aside, the interpretation of the provisions of the Presidency Towns Insolvency Act, 1909, and the inherent powers of the High Court to prevent abuse of the process of the Court.
Ratio Decidendi: The ratio decidendi of the judgment is that an insolvency notice can be based only on an executable decree, and the Court has inherent powers to set aside the insolvency notice when the foundation of the notice is found to be lacking.
Final Decision: The Court directed the matter to be placed before a larger Bench for further consideration.
2. The Notice of Motion is opposed by the decree holder. According to the decree holder, the Insolvency Notice cannot be set aside by this Court on the ground that the Decree is not enforceable, and because of the absence of leave of the Court under Order 21, Rule 22 of the Civil Procedure Code.
3. It may be pointed out here that under the provisions of Order 21, Rule 22 of the Civil Procedure Code, when an application for execution is made more than two years after the date of the decree, the Court executing the decree has to issue a notice to the person against whom execution is applied for, requiring him to show cause, on the date to be fixed, why the decree should not be executed against him. It is admitted position before me that the notice as contemplated by the provisions of Order 21, Rule 22 had not been issued to the judgment debtor before the decree holder took out the Insolvency notice. Apart from the contentions that the Court cannot set aside the insolvency notice on the ground that a decree is not executable, one more contention that is raised on behalf of the decree holder is that the notice contemplated by the provisions of Order 21, Rule 22 was not necessary in this case, because an application was made before the Division Bench of this Court, which passed the decree in the year 1995 in Notice of Motion No. 375 of 1995 and that Notice of Motion was dismissed by an order dt. 31st March, 1995. Therefore, relying on the proviso to the Rule 22, Order 21 of C.P.C., which provides that no such notice shall be necessary in case an application for execution is made within two years from the date of the last order against the party against whom the execution is applied for is made on any provision application for execution. Now, so far as this objection is concerned, in my opinion, this objection has no substance, mainly because the order that is contemplated by proviso to Rule 22 of Order 21 is an order made by the Executing Court on any previous application for execution. The order on which reliance is placed in support of this submission is passed on a Notice of Motion, which was taken out in the appeal, in which decree was passed . It is common ground that Notice of Motion was not taken out in any execution proceedings.
4. Now, in so far as main contention raised on behalf of the decree holder that insolvency notice cannot be set aside by the Court on the ground that the decree in relation to which the insolvency notice has been taken out is not executable is concerned, firstly, there is no debate before me that in the present case an execution application was made more than two years after passing of the decree, that before the date on which the insolvency notice was taken out and it was served on the judgement debtor, no notice as contemplated by the provisions of Order 21, Rule 22 was issued to the judge
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