Bombay High Court
RE : Bijay Singh Man Sigh Baht
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Headnote:Section 9(2) and Civil Procedure Code, Order XXI, Rule 21-Section 9(2) has to be considered as a new ground of insolvency on the happening of deemed insolvency which is by operation of law-Grounds to challenge a petition for insolvency are distinct from grounds to challenge a Notice taken out under Section 9(2)Once a Debtor is deemed to be an Insolvent by operation of law, the question of taking recourse to Order XXI, Rule 21, Civil Procedure Code will not arise.

       Sections 9(3) and (5)-Notice solvency-Challenge to notice by debtor - Grounds-Challenge to notice restricted to grounds set out in sub-section (5) of Section 9.-Section 9(5) has been introduced in the Presidency Towns Insolvency Act by Insolvency Laws (Amendment) Act 28 of 1978. The amended Section specifically sub-sections (3), (4) and (5) of Section 9 set out the mechanism under which the notice can be issued what the Debtor has to comply with and in case of challenge to the notice what are the various grounds. It is, therefore, clear that insofar as the notice is concerned, the challenge would be restricted to sub-section (5) of Section 9. This is so because under sub-section (3) of Section 9 after the notice is issued a duty is cast on the Judgment Debtor to either pay the amount or to secure the Judgment creditor to his satisfaction or that of his agent. If that be the case, the creditor is secured is no ground insofar as the challenge to the notice is concerned. On Notice being issued under Section 9(3) of the act if the debtor agrees to give security which is rejected by the creditor, it will be open to the Court to consider whether the security offered was sufficient and adequate to protect the interest of the creditor. In all other cases where no security is offered after notice is served under Section 9(3), at the highest if and at all it will be open for the Court to consider the challenge at the stage of deciding the insolvency petition, whether a case has been made out for passing an order of adjudication.

       Presidency Towns Insolvency Act (3 of 1909 as amended by Bombay Act 15 of 1939)

       1839 -Sections 9(1)(i) and 9-A and Section 9(5) (introduced by Central Act 28 of 1978)-Notice of insolvency-Section 9-A does not provide for challenge to notice unlike Section 9(5).-A reading of Section 9(1)(i) and 9-A of the Presidency Town Insolvency Act does not provide for challenge to the notice unlike Section 9(5) as introduced by the Central Act 28 of 1978. It is only on a decree being obtained which has become final and notice taken out under sub-section (3) and if the application taken out by the Debtor for setting aside the Notice is rejected, is he deemed to have committed an act of insolvency on the date of rejection of the application of the expiry of the period specified in the insolvency notice. It is only at that stage where a Petition for insolvency can be filed. The date of insolvency insofar as Section 9(1) as applicable in the State of Maharashtra is distinct insofar as Section 9(2) as introduced by the Central Act is concerned. Section 9(2) therefore will have to be considered in the context of Act of 28 of 1978. Once it is so read, it has to be considered as a new ground by itself. It is on the happening of such a deemed insolvency that a petition can be maintained by the petitioning Creditor. The deemed insolvency is therefore by operation of law. Sections 9(i) and 9-A as in the State of Maharashtra when Act 28 of 1978 came into operation are partly engrafted in clauses (2), (3), (4) and (5) of Section 9(2). Once there is a Central Legislation then the Central Legislation must prevail when both the Parliament and the State Assembly can legislate in the field. That being so the ratio of the Judgment in the case of M/s. Bhurmal Kapurchand Co., AIR 1977 Bom 305 would not apply.

       For Citation : 2000 (4) Mh LJ 217 (Bom) : (2000) 102 (1) Bom LR 760 : 2000 (2) All MR 668 (Bom)