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2006 Supreme(Bom) 539
IN THE HIGH COURT OF BOMBAY
Deepak Cochhar
Versus
Indusind Bank Ltd
The provisions of sub-section (2) of Section 9 of the Insolvency Act use the words 'decree or order' without qualification by 'of any Court', indicating that the decree or order need not be from a civil court. The nature of insolvency proceedings is in rem, for the benefit of all creditors, and not controlled by individual recovery proceedings under the RDDB Act.
Headnote:
Insolvency Notice - Jurisdiction of Insolvency Court - Insolvency Act - Section 9
Fact of the Case:
The judgment debtor sought relief to set aside an Insolvency Notice issued by the judgment creditor based on a recovery certificate issued by the Debt Recovery Tribunal. The judgment debtor contended that the Insolvency Act does not empower the Court to issue an insolvency notice based on a recovery certificate and that the recovery certificate is not an order or decree as contemplated under the Insolvency Act. The judgment creditor argued that the words 'decree or order' in Section 9(2) of the Insolvency Act are not qualified by 'of any Court' and thus can include a decree or order passed by any authority, not just a civil court. The Court analyzed the nature of insolvency proceedings, the distinction between in rem and in personam proceedings, and the interpretation of 'decree or order' under the Insolvency Act.
Finding of the Court:
The Court held that the order passed by the Debt Recovery Tribunal under the RDDB Act is an order as contemplated under Section 9(2) of the Insolvency Act, and thus the Court has jurisdiction to issue the insolvency notice. The Court rejected the argument that the recovery certificate is not executable and emphasized that the insolvency proceedings are in rem, for the benefit of all creditors, and not controlled by individual recovery proceedings under the RDDB Act. The Court dismissed the notice of motion and made the insolvency notice absolute.
Issues: 1. Whether the Insolvency Court has jurisdiction to issue an insolvency notice based on a recovery certificate issued by the Debt Recovery Tribunal. 2. Whether the recovery certificate is an order or decree as contemplated under the Insolvency Act. 3. Whether the provisions of the RDDB Act override the jurisdiction of the Insolvency Court under Section 9(2) of the Insolvency Act.
Ratio Decidendi: The provisions of sub-section (2) of Section 9 of the Insolvency Act use the words 'decree or order' without qualification by 'of any Court', indicating that the decree or order need not be from a civil court. The nature of insolvency proceedings is in rem, for the benefit of all creditors, and not controlled by individual recovery proceedings under the RDDB Act. The insolvency notice can be issued based on an order passed by the Debt Recovery Tribunal, and the recovery certificate is a procedural requirement for the execution of the Tribunal's order.
Final Decision: The Court dismissed the notice of motion and made the insolvency notice absolute, emphasizing that the insolvency proceedings are in rem and not controlled by individual recovery proceedings under the RDDB Act.
( 2 ) PURSUANT to an application made by the judgment creditor which is a bank to the Debt recovery Tribunal being O. A. No. 811/2000, the debt Recovery Tribunal has passed an order and judgment dated 8. 1. 2003 inter alia holding that the judgment debtor is liable to make payment to the judgment creditor of a sum of Rs. 3,30,11,926 along with further interest at the rate of 15% per annum. On 3. 3. 2003 a recovery certificate was issued by the debt Recovery Tribunal on the basis of the order and judgment 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 certificate issued by the Debt recovery Tribunal. It has been also contended in the affidavit in support of the motion that the jurisdiction of the Debt Recovery Tribunal is exclusive. The execution of the recovery certificate can be made only under the provisions of the Recovery of Debts Due to Banks and Financial institutions Act, 1993 (hereinafter referred to as the "rddb Act" ). It has been also contended that there is no provision under the Insolvency Act to issue an insolvency notice on the basis of a recovery certificate issued under the provisions of the RDDB Act. It has also been contended that what is issued by the Debt Recovery Tribunal is only a recovery certificate and the same can not amount to order or decree as contemplated under the provisions of section 9 (2) of the Insolvency Act.
( 4 ) THE learned counsel for the judgment debtor has inter alia further contended in support of the notice of motion that insolvency notice can be issued only on the basis of a decree or order for payment of money as contemplated by sub-section (2) of Section 9 of the Insolvency Act. It has been contended that the recovery certificate issued by the Debt Recovery Tribunal under the provisions of the said RDDB Act is not an order or decree as contemplated under the provisions of the Civil procedure Code and thus no notice under section 9 (2) can be issued on the basis thereof. It has been further contended that under the provisions of section 2 (2), and 2 (14) of the Civil Procedure code, 1908 the decree and order is defined as decree and order passed by the civil court and thus the order passed by the Debt Recovery Tribunal and/or consequential recovery certificate issued by the tribunal under the RDDB Act is not an order or a decree empowering this Court to issue insolvency notice under sub-section (2) of Section 9 of the said Act.
( 5 ) IN the alternative to the aforesaid submission it has been submitted that section 9 pre-supposes a notice of insolvency o
